With a substantial increase in rents across Australia, it has become cheaper to buy a home than rent in hundreds of suburbs around the country.
In 518 Australian suburbs, the monthly repayment on a home loan is lower than the average monthly rent. Amid the rapidly increasing interest rates in 2022, the difference has been as high as $927 a month.
The markets with the most suburbs where this is true are Queensland, Western Australia and the Northern Territory.
In the Northern Territory, mortgage repayments are cheaper than rent in 95% of the suburbs. In Western Australia, this is the case in nearly half the suburbs. It’s also true for about 20% of suburbs in Tasmania and 17% of suburbs in South Australia.
Even in a few suburbs in NSW (6%), Victoria (4.4%) and the ACT (1.4%), mortgage repayments are now cheaper than rent.
Suburbs Where Buying A Home Is Cheaper Than Renting
Adelaide’s northern suburbs favour buyers more than renters; for example, in Elizabeth Downs, the average monthly mortgage repayment is $412 less than the average monthly rent.
When comparing the cost of buying to renting in the Darwin suburb of Zuccoli, the average mortgage repayment is cheaper than average rent by a whopping $927. Darwin city is similar – mortgage repayments are cheaper by $712.
For buyers who want to purchase units , the ACT, Queensland, Western Australia and South Australia all have lower average mortgages than rent. For specific suburbs, Lyons in Canberra, Spring Hill in inner Brisbane, and Travancore in inner Melbourne can all offer a savings of $400 a month for buyers over renters. Also, buying is cheaper by $242 a month in Berkeley Vale on the Central Coast, and by $155 a month in Regents Park in south-west Sydney.
CoreLogic head of research Eliza Owen said falling prices and rising rents could attract aspiring homeowners to the property market.
“I think buying will look increasingly attractive to some cohorts in the short term, as price falls are expected to continue in line with rising mortgage rates, and there’s not much sign of a slowdown in rents, which could trigger first-home buyer decisions.”
“A fall in home prices will improve one aspect of affordability, which is the upfront transaction costs, namely the deposit. As prices fall, your savings could make up a higher portion of a property value, allowing for a larger deposit, or potentially more homes falling within reach.”
Owen added that rising rents could encourage some renters to get into homeownership.
“For some renters, rising housing costs may actually serve as a trigger to get into homeownership, but rising rents do make the accumulation of a housing deposit more difficult.”
Why Are Rents Expected To Rise In The Foreseeable Future?
Due to supply-chain disruption, increasing construction costs and weak consumer sentiment, the number of properties listed for rent has dropped significantly from the pre-pandemic level in capital cities and regional areas. Meanwhile, the demand for rental properties has increased more than anticipated. Some tenants have even offered to pay 12 months’ rent in advance to secure a property.
And the high demand for rental units may rise even further. National vacancy rates have already reached a record low of 1.1% and the government is expecting a strong net overseas migration in the next year. Returning migrants and tight housing availability would suggest that rents will climb even higher.
Factors Impacting Buyers’ Decision To Purchase A Home
Lower Borrowing Capacity
Over the past seven months, rising interest rates have made it difficult for Australians to qualify for a home loan.
Decrease In Property Prices
With the fall in property prices, homes have become affordable for some first-home buyers who were saving for a deposit. The decrease in property prices has allowed them to enter the property market sooner.
Difficulty Saving A Deposit
Aspiring homebuyers in some locations face difficulty saving a deposit, as a big chunk of their earnings goes into paying rent.
Is This The Right Time To Buy?
There is no right time to buy a home for everyone. Make an informed decision about when is the best time for you.
Falling property prices may entice homebuyers to purchase, but increasing interest rates may cause hesitation. So, should you buy or wait?
Everyone’s situation is different, so it would be best to contact a mortgage broker and share your situation to make an informed decision.
Feel free to call us on 1300 889 743 or enquire online to talk to one of our expert brokers today!