What the renting-is-throwing-money-away myth gets wrong
When you rent instead of buying, you are not throwing money away — you are paying for a service and keeping your capital free to deploy elsewhere.
The person who buys a $750,000 home with a $150,000 deposit (20%) and a $600,000 mortgage at 6.5% over 30 years is paying approximately $3,792/month in mortgage repayments, of which approximately $3,250 is interest in the first month — not equity. Plus ~$27,000 in stamp duty upfront and ~$1,200/month in rates, insurance, and maintenance.
The break-even year
In a realistic Australian scenario — $750,000 property, 5% annual capital growth, 6.5% mortgage rate, $2,500/month rent — the break-even is typically 6 to 9 years. Before that, the renter who invests diligently is often ahead financially.
The critical variables that change the answer
Capital growth rate: At 3% annual growth, buying may never break even over 20 years. At 8% growth, buying breaks even in 4-5 years.
How long you stay: Transaction costs are fixed regardless of hold period. Selling in 3 years requires enormous capital growth just to recover those costs.
Whether you actually invest the difference: The renting scenario only wins if the renter genuinely invests the monthly savings at market rates.
What buying gets you that the maths cannot capture
- Security of tenure: You cannot be evicted by a landlord.
- Freedom to renovate: You can improve the property as you choose.
- Compulsory saving: Mortgage repayments force savings that many people would otherwise spend.