It is an age old question: is it cheaper to rent or buy? Conventional Australian wisdom has it that "rent money is dead money", but I had two of my analysts at the RBA put this to the test. In their research, they found whether it is cheaper to rent or buy a home is an even money bet that depends largely on future house price growth. The research paper finds that if house prices were to keep growing at the average rate of the past sixty years, then buying a house now would be about as costly as renting. However, if house price growth were to slow in the future — as suggested by many forecasters, including my head of financial stability, Luci Ellis — then the average household would be financially better off renting than buying. The study found real house prices, also adjusted for the quality and size of the dwelling, rose 2.4 per cent a year on average over the past sixty years. However, the same measure of house prices has only risen 1.7 per cent a year over the past decade — if this growth rate was to be maintained, it would currently be 19 per cent cheaper to rent than to buy.
It is an age old question: is it cheaper to rent or buy? Conventional Australian wisdom has it that "rent money is dead money", but I had two of my analysts at the RBA put this to the test. In their research, they found whether it is cheaper to rent or buy a home is an even money bet that depends largely on future house price growth. The research paper finds that if house prices were to keep growing at the average rate of the past sixty years, then buying a house now would be about as costly as renting. However, if house price growth were to slow in the future — as suggested by many forecasters, including my head of financial stability, Luci Ellis — then the average household would be financially better off renting than buying. The study found real house prices, also adjusted for the quality and size of the dwelling, rose 2.4 per cent a year on average over the past sixty years. However, the same measure of house prices has only risen 1.7 per cent a year over the past decade — if this growth rate was to be maintained, it would currently be 19 per cent cheaper to rent than to buy.
Glenn, it is important to keep in mind that the RBA is part of the public service and they are servants of the laws and regulations of parliament and the government.
Unfortunately, we do not currently have a mechanism by which the servants of the public can put on the record that they believe, having regard to their knowledge and experience, that some laws or policies sux.
Expecting people to put their careers at risk as whistle blowers is asking too much. We need a culture where public servants are encouraged or even required to report direct to the public and not via are elected clowns.
The system is that they give their advice to our lords in the government and they decide what to do about it.
And that is assuming we don’t have pollies who politicise the public service so they only get told what they want to hear.
With all the defects of the above system IT IS OUR JOB to do what the public service cannot currently do and that is to bang the drum and call out crap policy and rent seekers driving the debate.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy