New Domain research has revealed that it is cheaper to pay a mortgage on a house than to rent in nearly one in seven Aussie suburbs.
In some parts of the country, the difference between paying a home loan and paying rent has blown out in favour of homeowners, as a result of a shortage of properties for lease, which has inflated asking rents.
Having a mortgage is cheaper than paying rent in 13.8% of suburbs nationally and in 21% of postcodes for units, Domain research has found.
The biggest chasm in rent versus mortgage figures was in Perth’s city unit market, where it costs $584 less a month to be a mortgage holder than to be a tenant. This was followed by Darwin city units ($516 a month in difference) and units in Brisbane’s Wooldridge ($380 difference).
The suburbs where it was more expensive to rent than pay a mortgage were those with stiffer competition from short-term residents, students, and young professions, said Domain.
Seven consecutive cash rate hikes since May, however, have added an extra $815 a month to a $500,000 mortgage, which in turn, has greatly reduced the number of suburbs where mortgage holders were better off than tenants compared to 12 months ago.
Last year, it was more expensive to rent than pay a mortgage, both for houses and units, in 50% of suburbs. But although mortgage costs continue to rise, demand for rentals outpacing supply has prevented the ledger from squaring, with the national vacancy rate now at a record low of 0.8%, Domain said.
The broadest opportunity for homeowners versus rents could be found in Perth, Darwin, and regional Australia.
In rural Australia, it costs less to buy than rent in nearly a quarter of suburbs for houses and 44.3% of suburbs for units.
Nicola Powell (pictured above), Domain’s chief of economics and research, said greater appetite for rentals – and therefore pressure on that market – could be the reason why mortgage costs in regions were lower.
“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,” Powell said.
Compared to other capitals, there were fewer suburbs in Sydney, Melbourne, and Hobart where it was cheaper to buy than rent.
To secure a mortgage that was cheaper than renting, Domain said buyers in Sydney’s Villawood need to fork out $29 per week more for a unit. In Hobart’s Risdon Vale, buyers only need pay $11 per week more to score a cheaper mortgage than the suburb’s rental prices.
In Melbourne’s Travancore, there are units with mortgages that are $28 per week cheaper than rentals. In Brisbane, Woodridge’s units cost $95 less per week than rents.
In Mawson Lakes in Western Australia, potential buyers will find they can secure a unit mortgage for $71 per week less than renting.
In Perth’s CBD, there are unit mortgages that cost $146 per week less than renting. Canberra’s Gungahlin offers unit mortgages that are $93 per week less than renting.
And in Darwin, would-be buyers can secure CBD units for a mortgage that is $129 per week less than renting costs, Domain reported.
