Rent V Buy

Reporter: Graeme Butler

So, the age old question and one that's never been more important than in Perth's volatile real estate market - Should you rent or buy a house - which is going to be better financially now and in the long run. They say fortune favours the brave - well that's the story for Peter and Veronica Kilrain - they've starting renting a house after selling an investment block and the family home - they took advantage of Perth's record real estate boom and cashed in.

"We'd had it for six years and we've done really well .... Got some extra" Financially Peter and Veronica say they're much better off renting for now - the only down side was searching for a house in the tight Perth rental market. "It was very touch and go and demoralising it was very demoralising"

"Just sort of though I've been renting for a while and spending money all the time and not seeing any of it, it's not benefiting me" Sara represents the other side of the coin - she might be doing it tough trying to pay a mortgage but she is happy to have a place of her own even if the sums don't favour her in the short term. "Even though I am paying money on rates and other things at least I know I feel in the long term it'll benefit me, historically it shos that property prices are increasing gains so are rent prices so if you look at that equation it's the homebuyer that benefits in the end"

So, back to that question, renting versus buying. Perth's property market is coming off the back of a boom - in some cases for the first time in years growth and values are going backwards - so we've asked interstate experts to analyse specifically the Perth market, to see what's financially better.

Renting or buying.

There's a lot to take into account when you're crunching the numbers on whether you're better off renting or buying in you're buying there's obviously the mortgage and interest rates but there's other costs as well like depreciation and maintenance as well as insurance if you're renting you need to take into account potential rent hikes as well as what you're going to do with the money you might save by being into eh rental market.

"Look at two different scenarios for a typical person whether to buy or rent" Arry Senlitonga is one of those people who loves the numbers you hate - the senior financial Analyst with Cannex has examined in detail the ups and downs of see sawing property market. "First scenario is where the interest rates stay the same for the next and the second scenario is where the interest rate goes back 25 basis point every year for the next five years" According to Cannex with no interest rate or rent increases buyers will slip behind renters by $28,630 in the next two years. This is particularly relevant for First home buyers looking to enter the market - the numbers DO confirm you're better off renting, for now.."If the property grows at 0% you're better off renting than buying"

"Right now given the current levels of growth and where we are in the over supply probably renting for the short term in the first homebuyers market is the way to go" Travis Coleman is a property valuer with Propell National Valuers says while the figures favour renting in the short term - it's important for renters who are planning to buy to save. "With renting I think a lot of people before they make the decision to buy into property don't fully realise the in and out costs of purchasing that property the additional costs that go onto it stamp for example the rates and takes that go into buying a property many of these you don't have to pay for when you're renting so it gives someone an opportunity to save enough money to make a generous deposit so therefore in the future when they do make that buying decision their financial burden isn't as great"

In scenario two, we keep interest rates steady but factor in small price increases for houses. This way, with property appreciating 2.75% a year, you break even after 5 years. So, from there on it's full steam ahead for buyers. The modest growth in prices puts buyers in front of renters.

"Not surprising that it shows that ultimately buying is better than renting for wealth creation over a long period of time" Rob Druit is president of the real estate institute of W.A and not surprisingly a strong supporter of buying your own home - he reminds us t the Cannex figures show is buyers have to be in it for the long run. "The key is not to over commit yourself when you 're buying a property and it is a lifestyle choice too there are times in your life when it's better to rent than it is to buy ultimately if you want to have security later in life it's far better to make sure you have your own home and you've bought a property"