Despite the rapidly rising prices in Sydney and Melbourne, for a surprisingly large number of suburbs across the country it is still cheaper to buy rather than rent as a result of lower mortgage rates, a new report shows.
An analysis compiled exclusively for The Australian Financial Review by CoreLogic was based on the median value of the suburbs as at October 2019. It assumed a 20 per cent deposit on a 30-year loan at a 4.25 per cent average discounted variable rate.
Greater Brisbane dominated the mainland cities for having the highest number of suburbs where it’s better to buy than rent. Out of 322 house markets, 138 suburbs (42.9 per cent) came in cheaper to pay for a mortgage than rent.
For about six out of seven (86.4 per cent) of the 206 Brisbane unit markets it cost less to service a home loan than pay rent to a landlord.
Higher supply in the Brisbane apartment market over several years has crimped growth in the sector, resulting in improved affordability for unit buyers.
“The weakness in prices has given buyers a window of opportunity to get into the market,” said Brisbane-based buyer’s agent Zoran Solano of Hot Property Buyers Agents.
“Now that Sydney and Melbourne are rising again, Brisbane is sure to follow, so home buyers have a very small window to get in.”
Logan has dominated the list of areas where buying is cheaper than renting. In Logan Central, the monthly mortgage repayment is currently $481 lower than the monthly rent.
Median rent in the suburb is sitting at $345 per week, which is significantly higher than the $254.5 weekly loan repayment.
In Hobart, two-thirds (66.7 per cent) of the 45 house markets are cheaper for buyers than renters despite the city’s recent strong price growth.
During the past five years, Hobart dwelling prices had surged by 39.1 per cent and gained another 2.6 per cent over the past 12 months.
Even with this growth, buyers of an average house in Gagebrook, north of Hobart would still save $732 per month compared to renters.
In Perth, bargain hunters are also spoilt for choice where about a third (37.8 per cent) of the 283 Perth house markets came in better to own than rent.
In Darwin, houses and units are cheaper to buy than to rent across the capital city, with all suburbs making up the analysis coming in with monthly mortgage repayments lower than monthly rents.
However, it’s slimmer pickings in Sydney. In only about 20 (3.3 per cent) of 608 suburbs did it cost less to own a home than rent.
Suburbs in the Central Coast such as Wyoming led the list, where the monthly mortgage repayment is $151 cheaper than the monthly rent.
A slightly higher 4.7 per cent of the 401 Sydney unit suburbs are cheaper to own than rent, according to CoreLogic’s October 2019 data.
Based on the median unit price of $487,619, buyers in Ropes Crossing are better off by $164 per month than renting.
CoreLogic found no suburbs across Melbourne’s house market where it is cheaper to buy than to rent, however, there are quite a few suburbs where the difference in cost is minimal. There are also suburbs where it’s cheaper to buy a unit rather than rent.
In Melton, 35 kilometres west of the Melbourne CBD, the difference in the cost of owning and renting a house is only $8 per month while in Lancefield, renters are $161 ahead of homebuyers.
Jeremy Sheppard, head of research at Select Residential Property, pointed out that while now is a good time to be a homeowner because interest rates are so low, it’s pointless buying in a market that is going backwards.
“If rents are higher than the cost of a mortgage and vacancy rates are tight and growth prospects are positive, then you have a very good reason to buy,” he said.
“If however, vacancy rates are high, rents are relatively low compared to the cost of a mortgage and growth prospects are slim, then there’s nothing wrong with renting.”
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