Rent or buy? Balancing the financial implications

In Australia, discussing property is practically a national pastime—and those who haven’t yet bought into the market tend to feel a little anxious about it.

But with sky-high property prices and all the responsibilities of ownership, is buying a home still all it’s cracked up to be? Is there anything actually wrong with renting? And how can you achieve a sense of financial balance, whichever option you choose?

Adnan Glinac, Executive General Manager of Life at Australian Unity, weighs the pros and cons, and suggests a mindset shift for those who are still committed to the Australian dream.

The Real Wellbeing benefits of owning your own home

It’s not hard to see why people are drawn to buying property. As well as being a historically safe investment, it offers stability, security and a sense of achievement.

“Home ownership creates quite a safety net, and we know that it positively impacts Real Wellbeing, especially as people get older,” says Adnan. “This is because home ownership reduces the uncertainty associated with rental markets, such as rent increases or eviction, giving homeowners peace of mind about their living situation in the long term.”

Owning your home also can lead to stronger ties within your community, as homeowners are more likely to stay in one place longer and invest in their surroundings. This fosters a sense of belonging and connectedness, which are integral to Real Wellbeing.

Renting as a viable alternative

All of that said, if the idea of home ownership starts to overshadow other aspects of your life—and if you financially overextend yourself to achieve it—it can become a negative experience, and detrimental to your wellbeing.

Plus, it’s not the only—or even necessarily the best—way to build financial security.

“Australians have really bonded to the idea of home ownership, but there are viable alternatives such as equities that also perform well over the long term,” says Adnan.

In fact, renting with investments can be a legitimate and sometimes preferable alternative to buying, offering more choice about where you live, more flexibility and fewer home-maintenance responsibilities.

It’s also worth considering that there’s a cultural element to our shared belief that renting is a less desirable option.

“I lived a long time in Europe, and they have a different perspective to renting over there,” says Adnan.

“In Germany, for example, renting is more prevalent than home ownership and it’s quite communal. You spent your time in the community, being out spend time with your friends, as opposed to partying in your home. It is a cultural mindset shift.

“So, as you can tell, I’m in two camps—and to be honest, I think everybody’s grappling with this same dilemma.”

A mindset shift—and a focus on balance

If you’re still interested in the idea of home ownership, Adnan suggests that you accept that it might be a long-term goal.

“I look at my generation and the younger generation, and I think the path to home ownership will be very different, and maybe a far more prolonged one,” he says. “So, it’s about going: ‘Okay, I’m not going to get there in three years—it will take me 10 years, but I will enjoy life along the way’.

“So now your focus is on figuring out the right balance, and a way to achieve your goal without putting a crazy strain on your own wellbeing because you feel like you have to be a home owner as soon as possible. No, you can rent for a while and work towards that goal. You just have to plan for rent increases and have a safety net.”

It’s really not all that different from being a home owner, he adds, since they have to plan for inevitable rate rises.

“What I'm saying is: home ownership and renting both require foresight and planning for you to figure out how you create a nice safety net, so that when the unexpected happens, you have a buffer,” says Adnan.

Practical takeaways

There was never going to be a one-size-fits-all answer to whether you should rent or buy, and of course it’s always best to consult a qualified financial adviser to determine which option would suit your individual circumstances.

Maybe you keep home ownership as a long-term goal, or maybe look at other ways to build wealth. The important thing is finding a balanced approach to spending, saving and investing based on your unique circumstances, financial goals and personal values.

“Whatever your situation, make sure you understand your cash flow and the uncertainties that might be coming,” says Adnan. “So, have an emergency fund, and think about how you can make saving and investing part of your routine.

“What you definitely don’t want to do is overextend yourself, creating a situation where home ownership derails the lifestyle and the safety net that you have around yourself.”