What Parity Means for Property Investors

This change will result in renters asking themselves, “Why would I rent when it's the same or cheaper to buy?” and you'll start to see a bunch of buyers come back into the market and buy properties.

In August 2012 RP Data put out a Buy vs. Rent Report - (you can download from their website), which clarifies one thing to me – that if RP Data has collated an actual report revealing where you can find up to 1,759 suburbs across Australia that are currently cheaper to buy than rent, then this parity situation is potentially going to start occurring – meaning buyers are heading back into the market and it’s time to start doing some due diligence in key areas before buyers start to drive prices up.

Tim Lawless, RP Data National Research Director stated, "With capital city dwelling values almost 6% lower than when they peaked back in October 2010, discounted variable mortgage rates 100 basis points lower from their 2011 peak and fixed mortgage rates 160 basis points lower, many renters and prospective home buyers are likely to be doing their sums to work out whether it is better for them to pay a mortgage or pay a landlord,"

The report also states that lower interest rates will not only further improve home loan affordability but also potentially attract more buyers into the housing market.

"For those that are renting, any further cuts to mortgage rates will make the cost of a mortgage more affordable and will further improve the relative comparison between the cost of buying and the cost of renting," Lawless explains.

I can foresee that right now if people have got access to some equity, or maybe the first home owner’s grant, the NSW New Home Grant Scheme which offers a $5000 rebate subject to Government approval etc. (meaning on some occasions for house and land packages their is no stamp duty payable on the land and your getting money back in the form of a rebate so you potentially end up paying no stamp duty and THEN you get cheque back from the OSR) which is a great strategy for those with little cash upfront, or even a little loan from mum and dad, you will absolutely see people incentivised to buy...

READ THE FULL ARTICLE HERE

Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property.

SEE MORE ARTICLES BY SAM

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