Thu, 9 May, 2019
New report reveals grim reality for Sydney homebuyers
According to new research and economic analysis of data conducted by EY, renters are better off renting in Sydney and maintaining an ASX200 investment instead of buying a home.
This flips the old mindset that renting is dead money, as Sydney residents are better off renting than buying in 60 per cent of cases over the last 25 years.
The analysis compared capital gains by individual who purchased a home against those who invested in a leveraged share portfolio, keeping to a savings plan and renting in an area where they can afford to buy.
“We would caution against just assuming that home ownership is the only way to create future wealth,” EY chief economist Jo Masters said.
“It’s time to give up on the mindset that renting is dead money. Yes, when you’re paying rent to a landlord, you’re not investing in an asset that you own – but with today’s property prices, you could be better off renting somewhere affordable and investing the cash you’ve saved.”
It’s important to note that when EY removed the ability for the lender to be able to leverage their ASX investment, results shift in favour of the homeowner.
EY also found that while the Sydney property market has cooled, the affordability for housing is at a historical low. The average house in Sydney costs 10.9 times more than the average NSW income, which is $83,517 according to the Australian Bureau of Statistics.
This means, that despite many wanting to own property, the buyer of an average Sydney home needs to save for more than 9 years to make the 20% deposit that’s required by most banks. This goes down to 7 years when saving for an apartment.