A new index for the Real Estate Institute of Western Australia (REIWA) has crunched the numbers around renting versus buying in Perth, and calculated the rate of annual value growth that would be required to make buying the more financially viable option.
Created in conjunction with Curtin University, the REIWA Curtin Buy-Rent Index is intended to help West Australians determine the best time to buy or rent, based on past and current trends in the economic climate.
According to the debut Index for the 2017 June quarter, median house prices would need to grow more than 4.3% per annum over the next 10 years, and surpass a value of $770,477, for the purchase of a house (‘buy’ decision) to be considered financially viable.
If house prices are expected to grow at a slower rate, then renting could be considered a preferable choice.
While past performance is not a guaranteed indicator of future performance, since June 2002, Perth’s annual growth rate has been 6.9%.
The index is based on a range of variable factors, including:
- Median house price for the Perth metro region – $508,000
- Median house rent for the Perth metro region – $360 per week
- 10 year average mortgage rate – 6.69%
- 10 year average Perth inflation rate – 2.29%
Figures for the September quarter Buy-Rent Index are set to be released late December 2017.