Australian guide
How to run a fair rent-versus-buy comparison
Rent-versus-buy is not answered by comparing rent with a mortgage repayment. A useful model follows both paths over the same period and accounts for what happens to the deposit and every cost difference.
Review scope: Method, Australian terminology, material assumptions, source links and user-facing limitations. See the editorial policy and public review log. Site-wide quality review completed 21 September 2026.
Model the buyer's complete cash flow
The buyer starts with a deposit and transaction costs, then pays loan interest and principal, rates, insurance, maintenance and possible strata or owners-corporation charges. Principal repayments build equity; interest and most running costs do not. Buying and selling costs matter more when the expected holding period is short.
The property-growth assumption changes the future asset value but is not guaranteed. Use several rates, including a flat or weak scenario, and do not rely on one recent market period as a permanent forecast.
Model the renter's alternative use of cash
A fair comparison gives the renter credit for investing the deposit, buying costs and any ongoing cash-flow difference. It also includes rent increases and investment fees or tax assumptions. If the model assumes the renter spends every difference, it is not comparing equivalent financial discipline.
The chosen alternative return should match an investable option and risk level, not a convenient number selected to force the outcome.
Use a time horizon that matches real plans
The result can change materially between three, seven and fifteen years because transaction costs are spread over different periods and loan principal reduces over time. Run a shorter scenario if work, family or location changes could lead to an early move.
- Use the same analysis period for both paths.
- Include buying, ownership and selling costs.
- Invest the renter's assumed cash surplus in the model.
- Test property, rent and investment assumptions independently.
Keep lifestyle outside the verdict
A financial model cannot price security of tenure, flexibility, renovation control, commute choices or the work involved in ownership. Present the financial result as one input to the decision, then consider the non-financial differences separately rather than hiding them inside an assumed rate.
Use the related calculators
Apply the guide with your own figures. Save the assumptions with the result and recheck them when rates, costs or circumstances change.
Official sources
CalcAussie reviews these pages against current Australian Government guidance.
General information only. This guide does not take your personal tax, financial or employment circumstances into account.