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An NPV Analysis of Buying Versus Renting for Prospective Australian First Home Buyers

25 Pages Posted: 5 Dec 2016  

Dominic Crowley

University of Melbourne - Department of Economics

Shuyun May Li

University of Melbourne

Date Written: December 2016

Abstract

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.

Suggested Citation

Crowley, Dominic and Li, Shuyun May, An NPV Analysis of Buying Versus Renting for Prospective Australian First Home Buyers (December 2016). Economic Record, Vol. 92, Issue 299, pp. 606-630, 2016. Available at SSRN: https://ssrn.com/abstract=2879683 or http://dx.doi.org/10.1111/1475-4932.12286

Dominic Crowley (Contact Author)

University of Melbourne - Department of Economics

Melbourne, 3010
Australia

Shuyun Li

University of Melbourne ( email )

Melbourne, 3010
Australia

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