New analysis from CoreLogic reveals renting in Australia’s most populous states is still cheaper than buying, but owning a home has become more affordable in other states.
In 518 suburbs around the country, the cost of mortgage repayments on a house is lower than the average rent price. Queensland, Western Australia and Northern Territory have the highest share of suburbs favouring buyers over renters, while NSW, Victoria and the ACT have very few suburbs where it’s cheaper to buy than rent.
In the Northern Territory, houses are cheaper to buy than rent in 95% of suburbs and in nearly half of all suburbs in Western Australia. Buying is cheaper than renting in more than one in five suburbs in Tasmania and one in six suburbs in South Australia.
However, only 6% of NSW suburbs are cheaper to buy than rent, 4.4% in Victoria and 1.4% in the ACT.
Adelaide’s northern suburbs favour buyers more than renters. In the suburb of Elizabeth Downs, buyers are better off than renters by $412 a month, by $339 a month in Elizabeth North and $359 in Smithfield.
In the Darwin suburb of Zuccoli, the cost of monthly mortgage repayments is $927 a month cheaper than renting and costs $712 less a month in Darwin city.
CoreLogic found buyers opting for units have more suburbs to choose from. In the ACT, Queensland and South Australia, buyers are better off than renters in more than half of all suburbs analysed and in 85% of unit markets in WA.
Unit buyers in Lyons in Canberra can save $486 a month over renting, by $441 in Spring Hill in inner Brisbane and $426 in Travancore in inner Melbourne. Buying a unit is cheaper than renting in Berkeley Vale on the NSW Central Coast by $242 and by $155 a month in Regents Park in Sydney’s southwest.
Logan Stanford (pictured above left), broker and managing director of Stanford Financial in Brisbane, said there had been several factors pushing the cost of rent up so rapidly, the foremost among these being the extremely low supply of available properties.
“The latest PIPA [Property Investment Professionals of Australia] Investor Survey showed that in the last two years, the amount of rental stock in Queensland dropped by 30%. This was driven mostly by 165,000 investment properties (or some 65% of investment sales) being sold to homebuyers,” Stanford said. “The PIPA Survey also showed that over 45% of investors have sold at least one property in Queensland within the past two years. This rapid sell-off of investment stock in conjunction with government stimulus, grants and schemes to assist homebuyers has further reduced available rentals.”
Stanford said rising interest rates and inflation increased the costs of property ownership, which landlords could only pass a portion of to their tenants.
“With over 70% of investors holding just one investment property, they must factor in their home repayments and household bills increasing as well as the net margin on their investment shrinking,” he said. “After seeing their property value double following years of near-stagnant growth, then factoring in these shrinking net returns, it is reasonable these investors would cash in and walk away before the market drops further.”
Eliza Owen (pictured above right), CoreLogic head of Australian research, said falling prices and surging rents could entice aspiring homeowners to get into the 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,” Owen said. “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 said despite the cheaper price points, aspiring homebuyers in some areas might still struggle to save for a home deposit.
“It seems that some lower socioeconomic, rental-heavy areas could be most challenging for first home buyers of any age to get into homeownership, such as pockets of Ipswich, North Adelaide and South Perth because rental values are particularly high relative to local income,” she said.
CoreLogic calculated that first home buyers would need to earn an annual income of $132,863 to service a mortgage on the median house in Australia, currently valued at $791,896. For an average unit valued at $604,492, buyers would need an annual income of $101,420 to service the loan.
CoreLogic’s calculation considered a 20% deposit on a 30-year mortgage using the average standard variable interest rate of 4.71%.
