Renting vs. Buying Property in Sydney and the effect of the RBA cash rate movements

ALEX SONCINI

THE decision to rent or buy property is a crucial financial consideration. In assessing the current affordability of renting versus buying property in Sydney, there are various factors influencing the movement of the cash rate and its relevance to the real estate market.

Renting Property in Sydney:

Renting property in Sydney offers flexibility and reduced upfront costs. As of now, the rental market in Sydney has experienced some control due to an increase in supply. Rental prices have stabilised or even slightly decreased in certain areas, making it more affordable for individuals and families seeking to rent.

Renters are not burdened with property maintenance costs or the need for a large initial deposit, allowing for greater mobility and financial flexibility. Moreover, renting offers the advantage of not being tied down to a particular location, making it an appealing option for those with uncertain longterm plans or frequent relocations.

Buying Property in Sydney:

While Sydney’s property market has been historically competitive, recent trends indicate a relative steadying, creating opportunities for potential buyers.

Interest rates were historically low until May 2022, which was making borrowing costs more affordable. However, the recent increase in the RBA cash rate along with the high demand for properties and limited supply continue to impact affordability. Prices may still be out of reach for many first-time buyers, particularly in desirable suburbs or city centres.

Additionally, purchasing a property incurs various additional costs, including stamp duty, legal fees, and ongoing maintenance expenses. However, owning property provides long-term financial security, potential capital appreciation, and the freedom to personalise and modify the living space of your home.

RBA Cash Rate Movements:

The cash rate is the interest rate set by the Reserve Bank of Australia (RBA) and is influential in determining the borrowing costs for financial institutions. It affects the interest rates offered to consumers on various financial products, including home loans. The cash rate is subject to constant adjustments based on economic conditions, inflation, employment levels, and monetary policy objectives.

The RBA adjusts the cash rate to control inflation, stimulate economic growth, or manage financial stability. When the economy is sluggish, the RBA may lower the cash rate to encourage borrowing and spending, thus stimulating economic activity. Conversely, if there is a risk of overheating or inflationary pressures, the RBA may increase the cash rate to cool down the economy which it is currently implementing.

At the moment, renting property in Sydney appears to be more affordable due to stabilised or slightly decreased rental prices. However, the decision between renting and buying depends on personal circumstances, financial goals, and longterm plans. Understanding cash rate movements is crucial as they impact borrowing costs and, consequently, the affordability of buying property.

As you embark on your property journey, don’t forget the importance of seeking expert advice, guidance, and solutions from Wealthwiz.

Call Alex today on 0419 600 177 to get ready for Sydney’s exciting property market!