Renting could trump buying, says RBA

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Are you concerned about the future of the rental market? Don’t be.

Not only are there ongoing affordability issues for many people when it comes to buying homes, but now the Reserve Bank has claimed Aussies may be better off renting if house price growth slows.

A new discussion paper by the RBA has delved into whether Australians are better off buying or renting.

According to the paper, if house prices appreciate according to historical trends, buying would be about as costly as renting.

But if house price growth slows to a pace below the historical average, the paper claimed the average home buyer would be better off renting.

"Many observers have suggested that future house price growth is likely to be somewhat less than [the] historic average. In that case, at current prices, rents, interest rates and so on, the average household is probably financially better off renting than buying," the paper said.

The RBA did note the limitations of the study, particularly that the paper focused only on whether households were financially better off buying or renting.

"The decision to buy rather than rent also reflects subjective factors that are difficult to measure such as security of tenure, freedom to renovate, access to finance, pride of ownership, the risk of capital losses and the flexibility of moving," the paper said.

Should renting indeed trump buying it would be good news for investors as demand for rental properties can only be beneficial.

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