Buying vs Renting: Did RBA Get it Wrong?
Announcement posted by Origin Projects - Land & New Homes in WA 18 Aug 2014
Developer of house and land packages in Perth debunks RBA research due to faulty methodology.
Perth, WA, 18 August 2014 - Usually, when the Reserve Bank of Australia (RBA) conducts research, the resulting report and its conclusions are accepted as unquestionable truth. The RBA usually combines superb research with insightful analysis to produce well-thought and persuasive conclusions.
However, a recent report concerning the expense of buying vs renting has produced controversy in the mortgage and real estate industries. The report, called “Is Housing Overvalued”, concludes that buying a home does not benefit a buyer any more than renting would. In other words, they are saying that in the long run it is just as expensive to rent a home as it is to own one.
What the Report Says
According to the report, if homes continue to grow at the same rate they have over the last sixty years, renters and buyers would spend the same amount of money over the long term, even when profits from the sale of the home are added in for the buyer. The report then concludes that if prices begin to rise at a slower rate, the renter will actually save money by renting.
They extrapolate this possibility because the average price rise yearly over sixty years is 2.4% while the last ten years have provided only 1.7% per year on the average. According to their calculations, a 1.7% rise per year isn’t enough to make buying a home more profitable than renting one.
A Dissenting Opinion
Madeleine McErlain, Marketing Manager of 4Land Property Group, believes that both the data and methodology are flawed and that key factors are not being considered. According to Ms McErlain, “There are some serious flaws and omissions in this research. One of the biggest mistakes is the implied assumption that housing growth will continue to stay at 1.7% for the next twenty or thirty years.”
Ms McErlain continued, “The last ten years, the property market, along with the rest of the economy, have had to endure the Global Financial Crisis. The last decade is a significant outlier and should not be extrapolated as having any chance of becoming status quo in the future.”
A Third Option
4Land Property Group develops land estates in the Perth area and has recently expanded to Geraldton. They conduct their own economic and demographic research before developing an estate. They select locations that are poised for above average long term capital growth. They have seen home values increase much more than 2.4%.
According to Ms McErlain, “At 4Land Property Group, we don’t feel that our homes are tied to the constraints of average capital growth. We do a lot of research to ensure that our buyers attain higher capital growth than the average home in any given suburb. Our land estates in the Perth market are always located near schools, shopping and other infrastructure.”
Ms McErlain concluded, “In the long term, it is always more profitable to own one of our homes than to rent.”
4Land Property Group develops house and land packages in Perth suburbs. They specialise in providing quality homes in areas primed for long term capital growth. To learn more, call (08) 9301 4445 or visit their website: http://www.4land.com.au/.
However, a recent report concerning the expense of buying vs renting has produced controversy in the mortgage and real estate industries. The report, called “Is Housing Overvalued”, concludes that buying a home does not benefit a buyer any more than renting would. In other words, they are saying that in the long run it is just as expensive to rent a home as it is to own one.
What the Report Says
According to the report, if homes continue to grow at the same rate they have over the last sixty years, renters and buyers would spend the same amount of money over the long term, even when profits from the sale of the home are added in for the buyer. The report then concludes that if prices begin to rise at a slower rate, the renter will actually save money by renting.
They extrapolate this possibility because the average price rise yearly over sixty years is 2.4% while the last ten years have provided only 1.7% per year on the average. According to their calculations, a 1.7% rise per year isn’t enough to make buying a home more profitable than renting one.
A Dissenting Opinion
Madeleine McErlain, Marketing Manager of 4Land Property Group, believes that both the data and methodology are flawed and that key factors are not being considered. According to Ms McErlain, “There are some serious flaws and omissions in this research. One of the biggest mistakes is the implied assumption that housing growth will continue to stay at 1.7% for the next twenty or thirty years.”
Ms McErlain continued, “The last ten years, the property market, along with the rest of the economy, have had to endure the Global Financial Crisis. The last decade is a significant outlier and should not be extrapolated as having any chance of becoming status quo in the future.”
A Third Option
4Land Property Group develops land estates in the Perth area and has recently expanded to Geraldton. They conduct their own economic and demographic research before developing an estate. They select locations that are poised for above average long term capital growth. They have seen home values increase much more than 2.4%.
According to Ms McErlain, “At 4Land Property Group, we don’t feel that our homes are tied to the constraints of average capital growth. We do a lot of research to ensure that our buyers attain higher capital growth than the average home in any given suburb. Our land estates in the Perth market are always located near schools, shopping and other infrastructure.”
Ms McErlain concluded, “In the long term, it is always more profitable to own one of our homes than to rent.”
4Land Property Group develops house and land packages in Perth suburbs. They specialise in providing quality homes in areas primed for long term capital growth. To learn more, call (08) 9301 4445 or visit their website: http://www.4land.com.au/.