australian housing (un)affordability and low-rent living

Housing affordability is a contentious issue at the moment in Australia. Homelessness is also a big problem. Did you know there are 110,000* homeless people in Australia, 26,000* of who live(?) in Queensland?

Kitty and I are long term renters and we are proud of this. We choose to rent rather than have to rent. To us renting makes a lot more sense both in financial and lifestyle terms, both of which I will outline below.

The Advantages of Renting

• A significant amount of rental housing in Australia is negatively geared. This basically means the owners pay more for the property each week then we pay them. The place we rent is valued at $550,000 (stupid I know). The owners pay a loan (~$950** week, ~$49,712 p.a) plus over $5000 p.a in body corporate, >$1000 p.a. in council rates, real estate admin fees (~$1500 p.a) and property maintenance. This means it costs the owner about $57,200 for our place each year. We pay them a gross total of $420 * 52 weeks = $21,840 per year, all inclusive. Don’t listen to Australian real estate agents though as we are apparently “paying off someone else’s mortgage“. I don’t think so. If you don’t believe me, visit here and here.
• I can live where I want, close to the city, my work and recreational facilities. I spend very little on public transport and have a small carbon footprint as I can walk just about anywhere in the city. The place I rent has a pool, spa, gym and home theatre, all included in my rent. I don’t need to spend any money on these activities.
• As low weekly rent, compared to my income, means I can be more flexible in living. As Alexander Kjerulf explains in his excellent ‘low rent living‘ post, I have the freedom to leave a bad job and the freedom to take a chance on a new job. I also have freedom to do what I think is right and what I enjoy.
• I don’t have to worry about making ends meet. I save money every week. I can spend some money on things I love doing (good value things) such as concerts, music, traveling and eating. I can find other investment opportunities as I don’t use all my money to purely pay for where I live. I avoid opportunity costs.
• There are enormous transactional costs in buying a home. Stamp duty, inspections, mortgage lenders insurance (rip-off), other insurances, loan fees etc. I am way too frugal to deal with all of these.

The Disadvantages of Renting

• We have rental inspections. I don’t like these as they do feel like an invasion of privacy, but, they are a good motivator to keep it clean and we use them to request property maintenance and improvements.
• People still generally look down on renters (even though we choose to rent). People often ask me why I don’t buy a place as if I am stupid, or poor. I am sick of having to justify myself. “But you’ll miss out“, “It’s a forced savings plan“. I hear all the same quotes, all the time. From now on I can just refer them to this blog post.
• Rents go up. Yes they do, but so do wages. Interest rates also go up (like tomorrow). In the past two years we have had two minor rent rises when there have been twice as many interest rate rises. We just signed a lease for 12 months during which the owners can’t raise the rent.
• You can’t put pictures up. This is just plain rubbish. We have an agreement with the owners where we can have one piece of art on every wall in our apartment. We also have own rugs and heaps of pot plants (drought friendly succulents). We also have heaps of our own lamps. Our apartment looks more homely than many people’s ‘own’ homes.
• You won’t keep up with the Jones’s. I guess this is why many people buy expensive houses in the first place. As Michael Franti sings: “Only a rat can win a rat race”.

* City of Broken Dreams – Courier Mail Q Weekend – 03-04/11/2007
** See Image Below