Renting vs buying is one of the most significant financial decisions Australians face. This calculator models both paths over time, accounting for property appreciation, rent increases, investment returns, and home ownership costs.
Rent vs Buy Calculator
Buying scenario
Renting scenario
The Honest Renting vs Buying Comparison
The rent vs buy question is genuinely complex. Both paths have merit and neither is universally “better” — it depends on your circumstances, the market you’re buying in, and assumptions about the future that nobody can predict with certainty.
The Financial Case for Buying
Forced savings through equity — each mortgage repayment builds equity. Unlike rent, which is money you never see again, mortgage repayments (the principal component) build an appreciating asset.
Leverage — you control a $800,000 asset with a $160,000 deposit. If the property grows 5% ($40,000), you’ve earned a 25% return on your invested deposit (before accounting for mortgage costs). No investment product offers comparable leverage for ordinary Australians.
Stability — once you own, you cannot be evicted or have your rent raised. This has a significant non-financial value, particularly for families.
Tax-free capital gain — when you sell your principal place of residence, the entire capital gain is exempt from CGT. This is one of the most generous tax concessions available to Australian individuals. See our main residence CGT exemption guide.
Inflation hedge — property values and rents both tend to rise with inflation. Owning locks in a fixed debt that erodes in real terms.
The Financial Case for Renting
Flexibility — renting allows you to move for work, lifestyle, or personal reasons without the transaction costs of selling (agent fees, stamp duty, legal costs can total 5–7% of property value).
Lower transaction costs — buying and selling property costs approximately 5–10% of the property’s value in total. If you’re not staying put for at least 5–7 years, these costs are hard to recover.
Avoiding a bad market — if property prices fall, renters are unaffected (from a capital perspective). In periods of price decline, renters who invest their deposit separately may outperform buyers.
The “rent money isn’t dead money” myth is partially true — but so is “interest is dead money.” At a 6% mortgage rate on a $640,000 loan, the first year’s interest cost is approximately $38,400 — comparable to annual rent in many markets.
Liquidity — the deposit kept in diversified investments is more liquid than property equity, which requires selling or borrowing to access.
What History Tells Us About Renting vs Buying in Australia
Over 20-year periods, buying in major Australian cities has generally outperformed renting and investing the difference — primarily due to strong capital growth and the leverage effect. However:
- This is not guaranteed for any individual property or market
- Regional markets and less desirable areas have underperformed significantly
- The 2017–2019 Sydney and Melbourne corrections showed that price falls are real
- High-rise apartment markets in particular have experienced prolonged underperformance
The key drivers of whether buying or renting wins over any given period are:
- Property price growth (the dominant variable)
- Your mortgage interest rate vs investment returns
- How long you hold the property
If property grows at 7% but you hold for only 3 years, buying is almost certainly worse than renting due to transaction costs. If property grows at 7% and you hold for 20 years, buying will typically be significantly ahead.
Non-Financial Factors in the Decision
The pure financial comparison ignores factors that matter enormously to many Australians:
- Stability and security — owning your home means no risk of eviction, no reliance on a landlord’s decisions
- Freedom to renovate and personalise — renters generally cannot paint, renovate, or modify
- Pets — many rental properties restrict pets
- School zones — owning in a specific zone is the only way to guarantee access
- Retirement planning — owning your home debt-free by retirement dramatically reduces your income needs
FAQ — Renting vs Buying Australia
Is renting forever a viable strategy in Australia?
Yes, if you invest the savings effectively and don’t pay excessive rent relative to your income. “Rentvesting” — renting where you want to live while buying an investment property elsewhere — is a common strategy. See our rentvesting guide.
What’s the break-even point for buying?
As a general rule, buying makes sense if you plan to stay in the property for at least 5–7 years. This allows enough time for capital growth to offset stamp duty, agent fees, and higher upfront costs.
Should I buy if I can’t afford 20%?
A smaller deposit means paying LMI, which adds cost. However, if prices are rising faster than you can save, buying earlier — even with LMI — may be financially ahead in the long run. See our LMI calculator to weigh the cost.
This calculator provides a simplified model for illustrative purposes. Results are highly sensitive to assumptions — particularly property price growth and investment return rates. The model is not a reliable predictor of actual outcomes and should not be used as the basis for major financial decisions. For advice tailored to your situation, speak with a licensed financial adviser. Find one through MoneySmart.