Calculated approach required

I REFER to the financial article “Putting your house in order” by George Fredrickson in the Navy News of September 2.
I have no dispute with the thrust of the article.

However, in his calculation comparing whether it is better to rent or purchase a home over the long term, he seems to assume that rent remains constant over the period, as do monthly loan repayments for a home which, by and large, remain constant.

I believe this is not the case as rents will rise to a level greater than that of the home purchaser’s monthly repayments, which means that the end figure projected by the author for renting versus purchasing is inflated.

Can I suggest that Mr Fredrickson be asked to clarify this point.

Peter Allerhand

Peter’s comment is quite true.

For simplicity’s sake I have assumed all figures to remain constant.

Is this a legitimate assumption to make? In fact rents have risen over the course of nearly any 20-year period. So you would expect your rent to rise.

Interestingly enough, during these times of oversupply of rental accommodation in some areas we are finding rents are dropping (one client whose DHA property has not been renewed has found the weekly rent has dropped from $250 to $185), and many landlords are offering incentives.

Similarly, in times of rising interest rates mortgage owners will find their repayments increasing if they have a variable loan.

A fixed term will not increase or decrease until such time that it comes up for renewal.

All these examples are really swings and roundabouts.

In the article we were trying to explain the concept in general without heaps of numerical details. I believe the emotive issues will prove most important in the long run.

George Fredrickson.

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