"Rent money is dead money" has propelled more bad financial decisions than any other sentence in Australian English. It survives because it compares a renter's biggest cost against… nothing, as if owning were free. Owning has its own dead money — it's just better hidden. The honest comparison stacks the renter's unrecoverable costs against the owner's unrecoverable costs, and lets price growth and rent growth fight it out.
The owner's dead money
Buying an $800,000 home with a 20% deposit ($160,000) and a $640,000 loan at 6% produces four unrecoverable costs in year one:
| Cost | Year one |
|---|---|
| Loan interest (6% × $640,000) | $38,400 |
| Rates, insurance, maintenance, strata (~1.5% of value) | $12,000 |
| Opportunity cost of the $160,000 deposit (7% in a broad index fund) | $11,200 |
| Total unrecoverable | $61,600 ≈ $1,185/week |
None of this builds equity. (Principal repayments do — that's why we exclude them; they're forced savings, not a cost.) Against this, the owner expects capital growth: at 4% a year, $32,000, or about $615/week.
Net unrecoverable cost of owning: roughly $570 a week.
If the same home rents for $650 a week, buying wins by ~$80 a week. If it rents for $500 — common for apartments, where rental yields run below houses — renting wins by ~$70 a week, provided the renter actually invests the difference and the deposit. That proviso does a lot of work, and we'll come back to it.
The assumptions are the answer
Notice how thin the margin is: on an $800,000 home the race is decided by a few thousand dollars a year, so every assumption swings the result.
Price growth is the big one. At 6% growth the owner nets $48,000 a year of appreciation and buying crushes renting. At 0–2% — entirely normal for five-year stretches in real markets, and the recent history of some capitals — renting wins clearly. Nobody knows this number in advance; that's the point. Anyone declaring buying "always wins" is asserting a growth forecast, not a fact.
Interest rates move the biggest line. At 5%, the owner's interest drops to $32,000 and buying gets $120/week cheaper. At 7%, add the same back.
Transaction costs punish short holds. Stamp duty (roughly $31,000 on this purchase for a non-first-home-buyer), plus legals, plus 2%+ agent fees on eventual sale — call it $50,000 round-trip. Spread over ten years it's $95/week; over three years it's $320/week. If your realistic horizon is under five years, renting wins almost regardless of the other assumptions.
The renter's discipline. The renting side of the ledger assumes the deposit stays invested and the weekly saving gets invested too. Households that would actually spend the difference lose the comparison in practice even when they win it on paper. A mortgage's forced saving has genuine behavioural value — arguably its most underrated feature.
Our rent vs buy calculator runs this full model — growth, rates, rent inflation, transaction costs, investment returns — over any horizon, so you can see exactly which assumption your decision hinges on.
The hybrid: rentvesting
Renting where you want to live and buying where the numbers work — rentvesting — splits the difference. You get the lifestyle suburb without its million-dollar entry price, plus a foothold in the property market, plus the tax deductibility of the investment property's costs (see the negative gearing guide). The costs: you give up the family home's capital gains tax exemption on the investment property, you take on landlord risk, and first home buyer concessions generally require living in the property. The rentvesting calculator compares the three-way race — rent-and-invest vs buy-your-home vs rentvest.
What the spreadsheet can't hold
Security of tenure is worth real money that never appears in the model: no landlord can end your lease, you can renovate, hang pictures, keep a dog, and hold a fixed nominal interest cost while rents inflate around you. Twenty years in, an owner's repayment is trivial against market rents and eventually stops entirely — owning is, among other things, pre-paying your retirement housing. Against that: flexibility to chase jobs, downsize, or leave a neighbourhood that changed, all of which renters do cheaply and owners do at $50,000 a move.
The bottom line
Run the unrecoverable-cost comparison with your suburb's rent-to-price ratio, your horizon and honest growth assumptions — not a slogan from either camp. Roughly: long horizon, house, disciplined market favours buying; short horizon, apartment, weak growth or an undisciplined saver's honesty favours renting-and-investing. The calculator will tell you which side of the line your numbers actually sit on.
Worked example uses a 6% loan rate, 7% equity return and 4% property growth for illustration; the calculator lets you vary all three. Stamp duty per state schedules. General information, not financial advice.