Renting vs Buying in Australia: Costs, Benefits & Long-Term Wealth Comparison

Renting vs buying in Australia? Compare costs, home equity benefits & long-term wealth growth. Feel free to use our calculators & expert tips to decide 😊  

Rent or buy? Weighing up your options is the first step to homeownership—our guide helps you decide what’s right for you

Deciding whether to rent or buy a home in Australia is a big financial decision. Both come with pros and cons, and the right choice depends on your financial goals, lifestyle, and long-term plans. 

In this article, we’ll break down: 

✔ The benefits of renting vs. buying 

✔ A financial comparison over 30 years 

✔ How homeownership builds wealth 

✔ How to use home equity for investment 

Use our Rent vs Buy Calculator to compare your situation! 

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Renting: Pros & Cons at a Glance 

Benefits of Renting 🏡	Drawbacks of Renting ❌
Lower upfront costs – No need for a large deposit, just a bond and first month’s rent.	You don’t build equity – Rent payments don’t contribute to ownership.
Flexibility – Easier to relocate for work, lifestyle, or personal reasons.	Rent can increase over time – You’re subject to market changes and landlord decisions.
No maintenance costs – The landlord is responsible for repairs and upkeep.	Lack of stability – The landlord can decide to sell or not renew your lease.
No risk from property price drops – You aren’t affected by market downturns.	Limited control over the property – You may not be able to renovate or personalize your living space.
Access to premium amenities – Some rentals include pools, gyms, and security.	Potential rent restrictions – Rules on pets, modifications, and subleasing apply.

Another milestone unlocked! This happy couple just secured their first home with the help of My Finance Agent. What a moment! 💙

Renting: Pros & Cons at a Glance 

Benefits of Buying a Home 🏡	Drawbacks of Buying a Home ❌
Builds equity – Every mortgage payment increases your ownership in the property.	High upfront costs – Requires a deposit, stamp duty, and legal fees.
Property value appreciation – Homes generally increase in value over time.	Ongoing expenses – Includes mortgage repayments, council rates, insurance, and maintenance.
Fixed repayments for stability – With a fixed-rate loan, you won’t face rising rent costs.	Less flexibility – Harder to relocate compared to renting.
No landlord restrictions – You can renovate, personalise, and modify your home.	Market fluctuations – Property values can go up or down.
Potential to generate income – You can rent out a portion of your home or buy an investment property.	Responsible for repairs – Unlike renting, you cover all maintenance and repair costs.

💡 Thinking about buying? Plan your budget with our  Loan Repayment Calculator. 

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Renting vs Buying: A 30-Year Financial Comparison 

Let's compare the total costs of renting vs. buying a $1,000,000 home in Australia over 30 years. 

Scenario 1: Renting 

• The average rental yield in Australia is 3.8%, meaning rent is $38,000 per year. 

• Over 30 years, total rent paid = $1.14 million. This is all your own cash. 

• After 30 years, you don’t own an asset. 

Scenario 2: Buying the Same Property 

• You will need a Deposit: $200,000 + Stamp Duty: $40,000. This will be your own cash. 

• Loan: $800,000 at 6.28% interest. 

• Monthly mortgage repayments: $4,941 per month over 30 years. 

• Total cost (including deposit, stamp duty & mortgage repayments) = $2,012,000. 

Cash Flow Difference: 

Scenario	Total 30-Year Cost	Asset Value after 30 Years
Renting	$1.4M	$0
Buying	$2.012M	$3.25M (assuming 4% growth)

Thus if you are focusing on cash flow, renting is a more attractive cash flow option as it ends up being $872k cheaper, but you have not increased your wealth by renting. With purchasing, your wealth at the end of 30 years is $3.25m.  

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Q: How Does Homeownership Build Wealth? 

A: Home values in Australia have historically grown by 5.4% per year. If you buy a $1,000,000 home and assume 4% growth, in 30 years, it would be worth $3.25 million. After loan payments, you would have $1.231 million in net wealth (new property value – original property value), whereas renting leaves you with no property assets. 

See how buying a $1M property could deliver $1.2M in net wealth after 30 years—compared to no asset from renting.

Q: What is home equity, and how can you use it? 

A: Home equity is the difference between your home’s value and your remaining loan balance. You can use it to buy an investment property. 

Example: 

• You own a $1.2M home with a $600K mortgage. 

• Usable equity: Is calculated by house value at 80% less any loans on the property. Thus $1.2m x0.8 = $960k less $600k Mortgage, equals $360K. 

• You want to buy an investment property for $650K. 

• The bank loans you 80% of the purchase price - $520K, and you need $165K upfront (20% deposit + stamp duty). 

• You can use your home equity to cover this amount instead of saving it. 

• So you end up with an investment loan for the full amount of $650k plus stamp duty and costs. All of this loan is tax deductible and is secured by your home and the investment property. 

💡 This is how property owners build long-term wealth!  

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Is Renting or Buying Right for You? 

Deciding whether to rent or buy a home depends on your financial goals, lifestyle, and long-term plans. Renting offers flexibility and lower upfront costs but doesn’t build equity, while buying provides stability and potential wealth growth but requires a significant financial commitment. Over time, homeowners generally accumulate more wealth due to property appreciation, while renters need disciplined savings to achieve similar financial security. Understanding the total costs and planning ahead is essential.

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