New index helps decide when to buy a home or rent

A new Buy-Rent Index will help Western Australians determine whether it’s best to buy a home or rent, according to REIWA and Curtin University.

WORKING out whether it is a good time to buy a home or rent might be a little easier with a Buy-Rent Index to be released on a quarterly basis.

The index, a collaboration between the Real Estate Institute of Western Australia and Curtin University, is based on formulated economic assumptions that help identify the annual house price growth rate required for home ownership to be financially advantageous over renting.

In a joint statement the institute and university said the June quarter figures indicated the median house price in Perth would need to appreciate by 4.3 per cent annually during the next 10 years for the purchase of a house to be considered financially viable over renting at the median rent.

“Since 2002, Perth’s annual growth rate in the median house price has been 6.9 per cent,’’ the joint statement said.

Real Estate Institute of Western Australia chief executive officer Neville Pozzi said the institute had collaborated with Curtin University to help educate and inform the public on the costs and benefits of home ownership versus renting.

“Curtin’s vast academic knowledge has enabled us to harness our research capabilities to produce this helpful tool,’’ he said.

“In the current economic and property climate, we recognise it can be difficult for West Australians to determine whether or not they should buy or rent.

“This index will provide prospective home owners and renters with an insight into whether it is a good time to buy or rent based on trends in the current market.”

J-Han Ho, a property researcher and senior lecturer in the School of Economics and Finance at Curtin Business School, said the index aimed to help Perth households make an informed decision about buying or renting a home.

“We understand the difficulties of housing affordability and therefore hope the Buy-Rent Index will make it a little easier for households to make an informed decision,” he said.

“Many households only focus on the location and price of the property when looking to buy, but this shows there are many other factors that need to be considered including interest rates, opportunity cost of capital and the property being a long-term investment.

“Buying at the right time can achieve a superior outcome to buying in the right location.”

The statement said figures for the September quarter Buy-Rent Index would be released in late December.