Why buying is cheaper than renting in Grafton

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Why buying is cheaper than renting in Grafton.

The numbers show very clearly that at this point in the property cycle it is cheaper to service a mortgage than it is to rent in Grafton for first home buyers looking to enter the property market.

If you are currently renting a property and the recent price increases of homes has you uncertain about whether to ‘hold off’ from purchasing, the following historical rent versus buy comparison quantifies in financial terms the choice of purchasing your home rather than renting:

Median House Price 2013 2021
Grafton $252,000 $385,000
Home Loan Variable Interest Rate 6.18% (1 July 2013) 2.73% (1 July 2021)
Interest Repayment p.a. $15,574 ($300/week) $10,510 ($202/week)
Median Rental p.a. $15,600 ($320/week) $18,200 ($350/week)
Difference (After Interest) $26 p.a. $7,690 p.a.

Note: The above comparison excludes Council Rates & Building Insurance.

The significant savings shown above means home buyers can enjoy savings that would have been rent money which can be used to further pay down their mortgage or invest elsewhere.

Capital Growth Prospects

The affordability of a median-priced property in Grafton at the current home loan interest rates indicates there are good capital growth prospects to be made.

While there is a cash flow benefit for first home buyers, (as illustrated in the table above), increasing property prices and the ability to add value through renovations may also result in capital gains for homeowners.

Investors – Depreciation Benefits

For investors, the above table shows a cash flow positive investment (after interest costs) of a median-priced investment property in Grafton. Investors are also able to access depreciation benefits for an income-producing property which is in addition to the rental income received.

Depreciation can be claimed on buildings that have been constructed since 1985 and recent renovations to buildings older than this can also be claimed, thereby reducing the taxable income for investors.

Sophisticated investors should speak with a quantity surveyor to determine the depreciation benefits that are available for their investment property.

The Next Step

Speak with your mortgage broker to accurately calculate repayments and serviceability to determine how buying a property in Grafton, can stack up well in the current market for both home buyers and investors.

Brought to you by Jeremy Rutledge Certified Practising Valuer & Quantity Surveyor of Asset Advisory Property Consultants.

The detail contained in this notice does not take into account your personal circumstances therefore appropriate financial advice should be obtained if being relied upon.

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