rent or buy
Outside of Melbourne and Sydney, it is mostly cheaper to buy than rent. Image – Canva.
  • Servicing a mortgage is cheaper than rent for over than a third of Australian properties
  • Only just over a quarter of properties in the capital cities are cheaper to buy than rent
  • The top ten areas where this is the case include Darwin, Brisbane, Perth and Adelaide

For more than a third of Australian properties, it’s cheaper to service a mortgage than rent, CoreLogic data has revealed.

This is especially the case for the regional Northern Territory, where for 96.4% of all properties, it is cheaper to buy than rent. However, over in Sydney, it’s only cheaper to buy in 4.9% of properties.

Nationwide, having a mortgage is far more effective in regional areas 60.1% of the time compared to only a quarter of properties in cities (26.2%).

Do you want to buy there though?

CoreLogic’s head of research Australia, Eliza Owen, commented that although an area may see cheaper mortgage costs than rent prices, this doesn’t mean it’s an area people want to buy in.

“Regional Northern Territory and outback Western Australia are prime examples,” Ms Owen explained.

“Rental costs tend to be higher in these regions, because accommodation that suits a more transitory lifestyle would likely be in higher demand – for example, in proximity to FIFO mine sites.”

Eliza Owen, CoreLogic Australia

Ms Owen also noted that regions where rent payments are likely to outstrip mortgage repayments often reflect lower socioeconomic areas where there is greater demand for rental properties, with housing being relatively cheap.

“This could be because of affordability constraints on barriers to entry around home ownership – such as a deposit hurdle, professional services or stamp duty payments.”

Although interest rates are at historically low levels, the fact house prices have soared across much of the country, especially in Sydney, many buyers are still being pushed out of the market due to the increased loan principals.

Real Estate Institute of New South Wales (REINSW) CEO Tim McKibbin recently argued that a low interest rate is “irrelevant” for first home buyers in Sydney, noting a 20% deposit for a median-priced house in Sydney – currently about $1.4 million – is $280,000.

“Add to this the removal of the temporary stamp duty concessions for first home buyers at the end of July, and the capacity for first home buyers to compete is further limited,” said Mr McKibbin.

“As such, while first home buyers have played an active part in the current buying cycle, it appears this trend is unlikely to continue at the same pace.”

Ms Owen said that given the current low interest rate environment – which is unlikely to change for years – renters should consider all housing options.

“The low interest rate environment is still conducive to better serviceability in many parts of the country.

“The analysis is a good reminder for renters to weigh up housing costs and savings, to see if it is time for a change in tenure.”

10 city areas where it’s cheaper to buy

Darwin heads the list on the cheapest place to buy compared to renting, followed by the southern Brisbane region of Logan & Beaudesert. The remainder of the top ten features areas are in Brisbane, Perth and a part of Adelaide – none of the other capital cities make an appearance.

 

Area (SCA4 region)  Portion cheaper to buy than rent
Darwin 86.5%
Brisbane – Logan & Beaudesert 81.8%
Brisbane – Ipswich 80.0%
Perth – Mandurah 74%
Adelaide – North 68.4%
Perth – North East 64.9%
Brisbane – Moreton Bay – North 63.3%
Perth – South East 62.8%
Perth – South West 59.9%
Perth – North West 58.1%

‘Sydney South West’ is home to where the number of properties to buy is cheaper than renting in the nations largest city at just 10.6%.

For Melbourne, this is ‘Melbourne West’ where 5.9% of properties are cheaper to buy.

“The relatively subdued rental growth may be largely due to a loss of rental demand from stalled overseas migration, where Sydney and Melbourne have traditionally been the most popular destination for international arrivals in the country,” said Ms Owen of CoreLogic.

“The combination of lower rent growth and very strong dwelling value growth has meant that even fewer properties across Sydney are cheaper to pay down a mortgage than rent, at just 4.9%. This is down from 7.1% when the analysis was done with the same assumptions in February 2020.”

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Notes:

  • CoreLogic conducted this analysis at an individual property level.
  • CoreLogic calculated mortgages assuming an 80% loan to valuation ratio – i.e. the buyer had a 20% deposit saved, which is generally needed to avoid Lenders Mortgage Insurance – for a 25-year loan on an interest rate of 2.4%, the average new lending rate for owner-occupiers, according to the Reserve Bank of Australia.
  • Rental payments were based on the rental estimate of the individual property.
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