It remains a grey outlook for the rental market as the demand supply abyss continues to widen. Image: Henry Thai.
  • Last year, it was cheaper to buy than rent in around 50% of suburbs
  • Despite higher rents, higher interest rates has resulted in less suburbs being affordable to buy than rent
  • Perth and Darwin remain the two cities where it is much cheaper to buy than rent across most markets

Data from Domain Research has found that nationally it is cheaper to pay off a mortgage than rent in 13.8% of suburbs for houses and 21% for units.

This has fallen from around 50% in a year.

The difference between repayments on a mortgage and rent has been squeezed as interest rates and property prices have risen over last year.

“While it might be thought that rising rents and falling house prices would bump up the number of suburbs it is cheaper to buy than rent, it has been overshadowed by rising interest rates and the subsequent escalating costs of holding a mortgage,” commented Domain Chief of Research and Economics, Dr Nicola Powell.

“It poses the question, how far will prices have to fall to offset the deterioration in mortgage affordability?”

Not equal

The data noted that not all markets are alike.

Regional Australia offers the greatest opportunity for those wanting to own their home. In a quarter of suburbs, it is cheaper to service a mortgage, and in 44.3% of units.

In Perth and Darwin, houses are 26.2% and 66.7% cheaper to buy than a unit respectively, with this dramatically increasing to 82.1% and 83.3% across units.

Table 1. The proportion of suburbs that it is cheaper to rent or buy.

Using 4.93% mortgage rate Proportion of suburbs that it is
Houses Units
Areas Cheaper to buy Cheaper to rent Cheaper to buy Cheaper to rent
Australia 13.8% 86.2% 21.0% 79.0%
Combined capitals 6.3% 93.7% 14.5% 85.5%
Combined regionals 27.3% 72.7% 44.3% 55.7%
Sydney 0% 100% 0% 100%
Melbourne 0% 100% 1.5% 98.5%
Brisbane 1.9% 98.1% 28.3% 71.7%
Adelaide 8.6% 91.4% 30.0% 70.0%
Perth 26.2% 73.8% 82.1% 17.9%
Canberra 0% 100% 39.3% 60.7%
Darwin 66.7% 33.3% 83.3% 16.7%
Hobart 0% 100%

Source – Domain

“A noticeable trend in regional Australia shows an area may have lower mortgage costs compared to rents but in some cases, it can reflect the local transient nature of the population,” commented Dr Powell.

“We’re also seeing the more premium a suburb, the greater the mortgage repayment became, relative to rent and rent is higher than weekly mortgage repayments in certain suburbs that have greater levels of competition from short-term residents, students and young professionals.

Nicola Powell, Domain

nicola powell
Dr Nicola Powell, Domain. Image – LinkedIn .

Across the combined capitals, it is cheaper to service a mortgage on house compared to rent in only 6.3% of suburbs, with this more than doubling to 14.5% for units.

Table 2. Top city suburbs where it’s cheaper to buy than rent.

Rank Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin
1 Villawood, units, +$29 Travancore, units, -$28 Woodridge, units, -$95 Mawson Lakes, units, -$71 Perth, units, -$146 Gungahlin, units, -$93 Risdon Vale, houses, +$11 Darwin City, units, -$129
2 Jamisontown, units. +$35 Albion, units, -$5 Kingston, units, -$76 Elizabeth Downs, houses, -$56 Rivervale, units, -$131 Denman Prospect, units, -$88 Bridgewater, houses, +$26 Larrakeyah, units, -$113
3 Blacktown, units, +$37 Essendon North, units, +$30 Caboolture, units, -$65 Elizabeth North, houses, -$53 Orelia, units, -$123 Bruce, units, -$75 Brighton, houses, +$34 Parap, units, -$108
4 Lakemba, units, +$45 Carlton, units, +$47 Carseldine, units, -$64 Plympton, units, -$51 Osborne Park, units, -$105 City, units, -$59 Rokeby, houses, +$64 Stuart Park, units, -$104
5 Campbelltown, units, +$56 Melbourne, units, +$50 Beenleigh, units, -$61 Davoren Park, houses, -$43 Wembley, units, -$98 Reid, units, -$50 Glenorchy, houses, +$74 Karama, houses, -$89

Source – Domain.

Table 3. Top regional suburbs where it’s cheaper to buy than rent.

Rank NSW Vic Qld SA WA Tas
1 Broken Hill, houses, -$138 Stratford, houses, -$14 Sunset, houses, -$190 Port Elliot, houses, -$361 Newman, houses, -$343 Queenstown, houses, -$69
2 Moree, houses, -$105 Kerang, houses, -$13 Blackwater, houses, -$169 Middleton, houses, -$246 Baynton, houses, -$340 George Town, houses, -$6
3 Casuarina, units, -$99 Maffra, houses, -$13 Collinsville, houses, -$163 Port Pirie West, houses, -$118 South Hedland, units, -$328 Smithton, houses, -$5
4 Cobar, houses, -$94 Red Cliffs, houses, -$12 Moranbah, houses, -$154 Port Augusta, houses, -$115 South Hedland, houses, -$308 Wynyard, houses, +$6
5 Wellington, houses, -$81 Mooroopna, houses, -$7 Cairns City, units, -$154 Port Augusta West, houses, -$101 Nickol, houses, -$275 New Norfolk, houses, +$11

Source – Domain

Following on from Dr Powell’s comments, it is common to see rents higher than mortgage costs in mining towns as investors seek a higher yield to make up for the higher-risk investment, as these towns are often associated with boom and busy cycles. For example, weekly rent is double that of a home loan in Newman, and triple for units in South Hedland.

A similar scenario can be seen in the cities, with rents outstripping mortgage repayments in more affordable areas. Property in lower socio-economic may not be as expensive, but there can be higher rental demand pressures due to the financial hurdles associated with purchasing, such as saving for a deposit and stamp duty.

Examples of this are Brendale in Brisbane’s north and Elizabeth North in Adelaide.

On the flip side, the more premium a suburb, the greater the mortgage repayment will be in relation to rent.

Opting to rent is generally more cost-effective on a weekly basis in locations with higher median purchase prices. Given they attract a premium from buyers, it can be challenging for rents to keep pace, thus they are cheaper to rent than buy. Examples include elite suburbs such as Vaucluse and Bellevue Hill in Sydney and Toorak in Melbourne.

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