- Data from REA Group shows price growth will remain strong
- Data assumes moderate price growth and already a 20% deposit
- Saving for a deposit will be the biggest hurdle for those trying to enter the housing market
According to REA Group’s Insights Buy or Rent Report, more than half of homes will be cheaper to buy than rent over the next 10 years, at current prices.
The report says that price growth is likely to remain strong as buyers take advantage of these conditions, while rent growth will likely remain slow, particularly outside of Sydney and Melbourne.
Low borrowing rates caused by central bank stimulus will attract home buyers, with analysis suggesting it is cheaper to buy around 57% of dwellings across Australia.
This figure jumps to 75% when looking at units only.
The data suggests that buying conditions are particularly favourable outside of New South Wales and Victoria, with more than 80% of houses, and almost all units, estimated to be cheaper to buy than rent.
It is expected that low interest expenses combined with longer-term moderate property price growth of around 3% will offset the costs of owning, such as stamp duty, maintenance and council rates.
Something crucial to point out is the analysis assumes buyers already have a 20% deposit. But as prospective home buyers try to get their foot in the door of the rapidly rising house market, saving for a deposit will be the biggest hurdle.
“Many would-be buyers can already afford loan repayments, but struggle to save a deposit while renting. Continued price growth may cause additional concern for many in this position,” the report said.
Paul Ryan, REA Group Economist and REA Insights Buy or Rent Report author, said the report findings point to continued strong housing price growth, particularly outside Sydney and Melbourne.
“Price growth has been strong and is likely to remain strong. Many regions have hit all-time price records so it’s understandable that many people would be surprised to hear that it’s still more affordable to buy in more places than it is to rent.”
“This research shows that much of the increase in demand we have seen in late 2020 and early 2021 has been driven by exceptionally low borrowing costs. The result is that the majority of properties in Australia are cheaper to buy than rent at current prices.”
Paul Ryan, REA Group Economist
“Investors are driven by the same comparison between prices and rents,” Mr Ryan continued, “so the finding that so many units in particular are cheaper to buy suggests there may be profitable investments currently available. On this basis, we expect investor activity in the housing market to increase through 2021.”