An NPV Analysis of Buying Versus Renting for Prospective Australian First Home Buyers
25 Pages Posted: 5 Dec 2016
Date Written: December 2016
This paper explores buying versus renting as an investment decision for a prospective Australian first home buyer, by comparing the net present values of buying and renting. An ex‐post analysis for overlapping 10‐year periods from 1983 to 2015 for Australia's eight capital cities suggests that buying was financially more favourable than renting over most of the study period. Renting was favourable in some capital cities for the decade from 1983, but buying was clearly favourable from the early 1990s to early 2000s in all capital cities. An ex‐ante analysis suggests that buying is currently favourable in Sydney, Melbourne, Perth and Darwin.
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