As many professional long term investors would be aware, before the last decade of low mortgage interest rates there were many reasons for renting and purchasing an investment property versus buying your home as your first property purchase.
Not only have the incredibly low interest rates helped renters and adult children still living at home enter the homeowner market, the massive government incentives over the past few years have enabled many Australians to jump into the property market many years sooner than they probably would have.
You see when interest rates are at traditionally ‘normal’ levels (historically 5%-7%) or higher, a few things happen:
•Mortgages become more expensive (obviously).
•Renting becomes a comparatively cheaper option compared to a mortgage for the same property type.
•You are more likely to be able to ‘live in’ (rent) a much nicer or larger property (or one in a more salubrious suburb) than you can afford to purchase because your weekly rent is significantly cheaper than your weekly