Rent vs Buy in Australia: Is It Better to Rent or Buy a Home?
A note on authorship: The research, analysis, and opinions in this article are the author's own. Claude (Anthropic's AI) assisted with drafting and editing the prose.
"Renting is dead money." Almost every Australian has heard it. But is it true? Owning a home costs money that never comes back too: interest, council rates, insurance, repairs and stamp duty. The real question isn't "rent or own". It's which choice leaves you with more money in ten years' time?
In this article we follow two people with exactly the same savings and the same monthly budget. One buys a home. The other rents a similar home and invests everything they don't spend on rent. We keep the numbers round, and every figure comes from our free Rent vs Buy calculator, so you can check it yourself.
What you'll learn:
- What buying really costs — not just the mortgage
- "Rent and invest the difference" — the fair way to compare the two
- Who's ahead, and when — after 1, 4 and 10 years
- What decides the winner — house prices vs shares, the rent, and how long you stay
- The 2026 Budget — what changed for the renter's investments, and what didn't for the home owner
The setup: same savings, same budget
Meet two friends, the Buyer and the Renter. Each has:
- $200,000 saved
- An income of $120,000 a year
- The same budget for housing each month: whatever owning a home would cost
The Buyer purchases an $800,000 home in New South Wales. The Renter rents a similar home for $2,500 a month. That last rule about the budget is what makes the comparison fair. Owning costs more each month than renting, so the Renter takes the money they save and invests it in shares every month, instead of spending it.
What buying a home really costs
First, the money that goes out on day one:
| Savings | $200,000 |
| − Stamp duty (a state tax on buying property) | −$31,200 |
| Deposit | $168,800 |
| Home loan ($800,000 − deposit) | $631,200 |
Stamp duty is money that's simply gone: it doesn't buy any part of the house. Here it uses a simplified 3.9% of the price. The loan is about 79% of the home's value, just under the 80% line where most banks add lenders mortgage insurance (an extra fee that protects the bank, not you).
Then the money that goes out every month, in the first year:
| Loan repayment (6% interest, 30 years) | $3,784 |
| Council rates, insurance and repairs (about 1.5% of the home's value a year) | $1,060 |
| Cost of owning, per month | about $4,840 |
Only part of that loan repayment builds wealth. In the first year, most of the $3,784 is interest (the bank's fee for lending you the money). Only about $630 a month actually pays down the loan. The interest, the rates, the insurance and the repairs are the home owner's version of "dead money".
And there's one more cost at the end. When the Buyer eventually sells, agent and legal fees take about 2.5% of the sale price.
Renting and investing the difference
The Renter's first year is simple:
| Invested on day one (no stamp duty to pay) | $200,000 |
| Monthly budget (same as the Buyer) | $4,840 |
| − Rent | −$2,500 |
| Invested every month | about $2,340 |
Rent goes up every year (to about $3,260 a month by year 10), but so do the Buyer's rates, insurance and repair bills, which grow with the home's value. The two rise at almost the same pace, so the amount the Renter invests stays close to $2,300 a month for all ten years. That adds up to about $278,000 invested on top of the first $200,000.
The assumptions
Any comparison like this depends on guesses about the future. Here are ours, which are also the calculator's starting values:
| House prices grow | 6% a year |
| Shares return (growth plus dividends) | 8% a year |
| Rent rises | 3% a year |
| Home loan interest rate | 6% |
| Inflation | 2% a year |
Treat these as a starting point, not a forecast. We'll see shortly how much the answer moves when they change.
Renting vs buying after 10 years: who's ahead?
To compare fairly, we imagine both friends cash out at the end. The Buyer sells the home and repays the loan. The Renter sells the shares and pays the tax on their gains. (This is just a way of keeping score. In real life the Renter could keep the shares, or sell them gradually over several years, and pay less tax.)
| The Buyer | The Renter | ||
|---|---|---|---|
| Home value | $1,433,000 | Share portfolio | $835,000 |
| − Loan still owed | −$532,000 | − Capital gains tax | −$81,000 |
| − Selling costs | −$36,000 | ||
| Wealth | $865,000 | Wealth | $754,000 |
With these assumptions, the Buyer ends up about $111,000 ahead. Notice the Buyer pays no tax on the home's gain: the home you live in, your main residence, is exempt from capital gains tax. The Renter's shares aren't.
Why does buying win here? Look at the loan. The Buyer borrowed $631,200, so the house growing at 6% is growing on $800,000, not just on the Buyer's own money. Borrowing to own a growing asset magnifies the gains. And a home loan is unusually cheap, long-term borrowing: no one would lend the Renter $631,200 at a home-loan rate to buy shares.
It magnifies the losses just as much. If house prices fell 10% in the first year, the home would lose $80,000 of value, and all of that loss comes out of the Buyer's $168,800 deposit: almost half of it gone, while the full loan is still owed. And if prices simply went nowhere for ten years, the Buyer would finish with about $248,000 against the Renter's $694,000. Share markets fall too, often harder and faster than house prices. The difference is that the Renter hasn't borrowed to buy them, and by investing a little every month they buy at a mix of high and low prices rather than all at once. The Buyer's money is tied up in one property, with a loan that has to be repaid whatever happens to its price.
But it depends on how long you stay
Here's the same comparison if both friends cashed out earlier:
| Cash out after | Buyer | Renter | Who's ahead |
|---|---|---|---|
| 1 year | $203,000 | $240,000 | Renter by $37,000 |
| 2 years | $261,000 | $284,000 | Renter by $23,000 |
| 3 years | $322,000 | $330,000 | Renter by $8,000 |
| 4 years | $387,000 | $379,000 | Buyer by $8,000 |
| 5 years | $455,000 | $431,000 | Buyer by $24,000 |
| 10 years | $865,000 | $754,000 | Buyer by $111,000 |
For the first three years the Renter is ahead. The reason is the two one-off costs that only the Buyer pays: $31,200 of stamp duty on the way in and 2.5% selling costs on the way out. It takes a few years of house price growth to earn those back. In this example, buying only pulls ahead after about four years. If you might move for work, or your family might outgrow the home, that matters.
What really decides the winner
The biggest single input is how fast house prices grow compared with shares. Here's the 10-year result as both change, with everything else the same:
| House prices grow… | Shares return 6% | Shares return 8% | Shares return 10% |
|---|---|---|---|
| 4% a year | Renter +$35,000 | Renter +$109,000 | Renter +$195,000 |
| 5% a year | Buyer +$70,000 | About even | Renter +$90,000 |
| 6% a year | Buyer +$186,000 | Buyer +$111,000 | Buyer +$24,000 |
One percentage point of house price growth, from 6% to 5%, turns a $111,000 win for the Buyer into a dead heat. Nobody knows what house prices or shares will do over the next ten years, so the honest answer to "rent or buy?" is a range, not a single number.
Three other things move the result a lot:
- The rent. At $2,000 a month instead of $2,500, the Renter invests more and finishes only about $18,000 behind. At $3,000 a month, they finish about $204,000 behind. A home that rents cheaply compared with its price favours renting.
- First home buyer concessions. Every state cuts stamp duty for first home buyers. In New South Wales, a first home buyer currently pays no stamp duty at all on a home up to $800,000. Without the $31,200 bill, the Buyer is ahead from the second year, and finishes ten years later about $168,000 ahead instead of $111,000. Check your own state's rules: the thresholds and amounts differ, and they change.
- The interest rate, in a surprising direction. A higher mortgage rate makes owning more expensive each month, which means the Renter has more to invest. At 7% interest instead of 6%, the gap shrinks from $111,000 to about $29,000.
The catch: the Renter has to actually invest
Everything above assumes the Renter puts about $2,340 into shares every single month for ten years. That takes real discipline. A mortgage forces you to save: the bank takes the repayment whether you feel like it or not. Nobody forces a renter to invest the difference.
What if the Renter invests the first $200,000 but spends the monthly difference instead? After ten years, they'd have about $372,000 after tax, less than half the Buyer's $865,000. That's where "renting is dead money" comes from. Rent isn't the problem. Spending the savings is.
What the 2026 Budget changed
The May 2026 Federal Budget changed how investments are taxed, and it matters for the Renter:
- The home owner: no change. Your main residence is still exempt from capital gains tax (tax on the profit when you sell something for more than you paid).
- The Renter's shares: taxed differently. Shares bought after 12 May 2026 no longer get the 50% capital gains tax discount. Instead, the price you paid is first increased by inflation, and only the gain above that is taxed, at a minimum rate of 30%. In our example, that's the $81,000 tax bill on the Renter's portfolio.
- Negative gearing limits apply to investment properties, not to the home you live in, so they don't affect this comparison. They do matter for a third option, rent-vesting: renting where you live while owning an investment property somewhere else. Our calculator models that too.
A few simplifications to know about: the calculator taxes the Renter's shares only when they're sold at the end, and ignores the yearly tax on dividends, which flatters the Renter slightly. For Australian shares the effect is small, because most Australian dividends come with franking credits: a credit for the 30% tax the company has already paid on its profits. At a 32% tax rate, that credit covers almost all of the tax on those dividends. Overseas shares carry no franking credits, so for them the effect is bigger. Stamp duty uses a simplified flat rate per state, and the main example uses full stamp duty, not a first home buyer concession. Neither friend's income or job changes, and nobody moves house in between.
What the numbers can't tell you
Money isn't the only thing that matters here. Owning gives you security: no landlord can ask you to leave, and you can paint the walls or renovate the kitchen. Renting gives you flexibility: you can move for a job, a relationship or a better school without paying stamp duty again. Both are worth something, and only you can decide how much.
Three things to remember
- Compare like with like. The fair comparison is the same savings and the same monthly budget, with the Renter investing everything the Buyer would have spent on owning.
- Time matters. Stamp duty and selling costs mean buying usually needs several years to pull ahead. In our example, about four.
- The assumptions decide the answer. One percentage point of house price growth can swing the result by over $100,000. Try a few different futures, not just one.