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More incentives to buy vs rent

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Renters who eventually want to be homeowners should find the present situation very tempting. Rents are high, interest rates are low and the government incentives are available at above-normal levels.

The latest QBE LMI Half Yearly Property Update, compiled by BIS Shrapnel, shows that by June 2009 the cost of renting in Sydney and Melbourne won't be far off the cost of owning a new home and paying a mortgage.

In fact, the gap between the cost of paying off a mortgage on a median-priced home is now closer to that of paying rent in those major cities than at any time in the past decade, according to the report.

Weekly median rents are now more than 66% of the median home loan repayments. The ratio is even closer in Canberra, Brisbane and Perth - where it is expected to approach 80% - and 75% in Adelaide.

"The incentive for first homebuyers to enter the market has never been stronger," said Ian Graham, chief executive officer of QBE LMI, a leading provider of mortgage insurance.

The rising rents and lowered interest rates are also proving a boon for investors.

"According to our research, conditions for investors are at their best since the late 1990s, with a differential between yields and interest rates estimated at 2% in the March Quarter 2009," said Graham. "Our report shows that through 2009 and into 2010, investor sentiment towards residential property is expected to increase significantly."

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