This year we held Australia’s biggest millennial money survey. We’re spending the next few months trying to unravel the parts of our economic lives that cause us so much anxiety. Stick with us, we’re all in this together.
Most young people aren’t buying houses anytime soon. First of all, they’re too expensive and although prices are declining, it doesn’t mean they’re actually affordable. Especially when wage growth is low, underemployment—especially among young people—is rising, and the cost of essentials like transport and food are increasing.
But have you ever stopped to ask, do I even want to buy a house? Sure, renting has always been seen as “dead money” and property as some fool-proof investment. But maybe there’s more to the story. Not everyone who decided to not buy a house made that choice under duress. For some, long term renting has proved to be the smarter option.
We spoke to some long term renters about their decision to rent forever to see if they’re onto something good.
Kat, renting for nine years
I’ve been renting since I was 24, and initially it wasn’t even a decision. I was working for a small non-profit at the time and had a very tiny salary so all I could afford was a shoebox of an apartment.
My income has gone up substantially since then, and I absolutely could afford to buy a home, but I’m a determined renter. Renting allows me to have a much higher standard of living, as I can afford all these amenities and luxurious add-ons. If what I pay in rent was translated to a mortgage, I’d have a tiny, little home. I’m a freelancer too, so I need to have that flexibility. If something changed and you needed to get a job, owning a home means you either find something local or you have to sell your house.
Plus, If something breaks, I love being able to call my landlord and have them fix it.
Owning a home also means you need money in reserve for emergencies, like your roof breaking. With renting, I can invest that extra income into other opportunities like the stock market, especially now since everything’s [the housing market] going down. It also means I can aggressively save for an early retirement and ensure I never have to take on any form of debt. That’s my biggest priority—staying out of debt. I previously had a student loan, and I never want to replicate that experience of debt hanging over my head. The idea of a $200,000 mortgage, even if it’s “good debt”, scares me.
I hear the argument that buying a house is an investment, but it’s not a guaranteed investment. My brother, for example, bought a home in 2007—literally two months before the global recession hit, and he still hasn’t recouped what he lost.
Cleo, renting for over 25 years
For me, renting wasn’t exactly a choice. I moved to Sydney in 1998 for employment opportunities and back then, houses were already $600,000. Seeing as my partner and I had a dual income of $70,000, it just wasn’t viable. We did look at properties on the Central Coast but decided against it because of the commute to work. Also, the thought of having a financial commitment of 30 years was scary to us. I think everyone wants to own their own home, but all the additional costs put us off.
Share houses can become problematic though, with things like privacy, theft, violence and drug use. For the last 10 years, my partner and I lived in the same house, but it never felt like home. Our landlords, who lived next to us, had a significant impact on our quality of life. We’d alter our behaviour and pay for all the repairs, just in case we’d offend them and lose our lease. They weren’t considerate of us though, sending tradies, council and bank representatives to our house without informing us. They’d increase the rent twice a year every year as well, to the point where we needed boarders to help cover the rent, which at our age wasn’t suitable. We put up with it because finding an affordable house was impossible. Even now, just having moved to Orange, it was incredibly challenging for us to find and get approved for something affordable.
I do regret not buying a home when I was younger. At my age, people expect you to own your own home. But seeing as I’m currently unemployed, due to my disability, and live with my partner and two dogs, we aren’t in a position to buy a house. At the same time though, I don't regret renting. Renting provides a lot more freedom. If you’re young and want to travel, you can always find somewhere when you get back. And by today’s standards, there aren’t many people that can afford a property on one income.
Tony, Renting for over 28 years
I moved out of home at 23, which back then, was quite late to be moving out. I have to admit that renting wasn’t my preferred option. Mostly because my parents, who saw it as “dead money” discouraged it.
Originally, I’d saved $23,000 for a deposit for my own place but unfortunately, interest rates weren’t very conducive to this. I was looking at two-bedroom flats in Melbourne’s South-Eastern suburbs, which were about $95,000. But with interest rates being 17.5 percent, I discovered when I went to the bank that the repayments would be around 70 percent of my income, plus stamp duty, council rates, insurance, and body corporate fees. As a single person, these costs were beyond my budget.
I decided to move into a share house close to the city, which actually opened new career and social opportunities for me. Because I was renting, I could take risks with my career, and try different things like being unemployment while studying or travelling—things I could never do with a mortgage.
In 2010 though, I started questioning this philosophy after being forced to move out twice as my landlord intended to renovate and sell. As a tenant, you have very little security. So in 2016, I bought a block of land in a country town a couple of hours out of Canberra. When I compare the mortgage and the rates on this block of land to say, Canberra, I’m better off renting. It may be “dead money”, but so are council rates and interest. I recently read that when you buy property, you’re still renting. You’re just renting money rather than space.
My plan now is to keep renting space while I slowly add value to my land, build a house and hopefully, buy a couple of investment properties. I think the fashionable term now is “rentvesting.”
*Names have been changed
Interviews have been edited for clarity and length.
Check out the rest of our Payday content here.
Follow Sam on Twitter