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Is it cheaper to buy than rent?

Updated: Mar 7, 2022

In a recent industry report 'Buy vs Rent' found that in almost 60% of suburbs across the country, paying a monthly mortgage could cost less than paying rent.

The report cited several locations where purchasing a property could be cheaper – including Carlton in Melbourne, where mortgage repayments could be up to $675 less than monthly lease payments, and Coolangup in Perth, where loan repayments could be as much as $597 lower than paying rent. Monthly repayments in Logan, Brisbane could also be $590 less than rents, while in Liverpool, Sydney, buying a home could mean saving $194 each month compared to renting.

So is buying a property an even smarter financial decision than we’ve always thought? “It certainly is, it shows that, even if you’re thinking about renting, you should still compare the rent to the cost of buying in an area, and you may be pleasantly surprised. Buyers’ agent Chris Gray, CEO of Your Empire.

Without doubt with interest rates at historical lows, it is fair to say it is currently cheaper to buy a home than pay rent in over a third of all the Australian suburbs for which there are reliable statistics. Even more shocking is the fact that, in some cases, those mortgage repayments can add up to less than half the weekly rent.

A recent Domain Study Report concluded, while buying is cheaper mostly in regional areas of the country, and on the outskirts of cities, some of the biggest bargains are found in some desirable areas, such as Mollymook Beach on the south coast of NSW and Portland on Victoria’s southwest coast.

The modelling was based on median sales and rent data for 2020, and assumed homeowners were paying a rate of 2.48 per cent on a principal and interest loan and had already saved a 20 per cent deposit. It did not factor in housing costs such as stamp duty, council rates and maintenance.

The nation’s top bargain for buying a home – over paying rent – is, surprisingly, at Mollymook Beach where the average weekly mortgage repayment is just $645 as against the median weekly rent of $1260, representing a saving of $615.

In NSW, as well as on the coast and in the country, it’s also a lot cheaper to buy than rent in a number of suburbs of Newcastle, such as Rutherford, where you can save $42 if you buy rather than rent, and Lake Illawarra in Wollongong where you’ll have an extra $17 in your pocket.

Top suburbs where it's cheaper to buy than rent

Recently, the Reserve Bank of Australia (RBA) has decided to make further adjustments to the cash rate, lowering it to another historic low of 0.1%. It also indicated that rates would stay at record lows for at least another three years, giving potential home buyers a sense of certainty.

Apart from low rates, first-time home buyers can access several state-based grants and stamp duty savings, including the $25,000 HomeBuilder Grant and First Home Owners Grant.

Buyers can save money and take advantage of the First Home Loan Deposit Scheme, which makes it possible to purchase a property with only a 5% deposit and no lenders mortgage insurance. Aussie said the grant opened an additional 10,000 places last month.

Capital city suburbs

In a recent report carried out by Core Logic it found that in many major cities however this was dependent on the city and the mortgage repayment scenario.

Under the discounted variable rate scenario, 16.9% of capital city suburbs recorded lower monthly mortgage repayments compared with rental payments for houses, rising to 34.7% of suburbs under a three-year fixed-rate scenario.

Sydney and Melbourne recorded no suburbs where it was cheaper to service a mortgage on houses than rent based on a variable rate.

However, 82.6% of Darwin suburbs, 50% of Hobart suburbs and more than a third of suburbs across Perth and Adelaide were more affordable to pay down a discounted variable rate mortgage than rent for houses.

Under the fixed rate scenario, 5.3% of Sydney suburbs were more affordable to service a mortgage than rent for houses, while this was the case for only 1% of Melbourne suburbs.

Every suburb across Darwin was cheaper to pay a mortgage than rent under a fixed-rate scenario, and the proportion was more than 50% across Brisbane, Adelaide, Perth, Hobart, and Darwin.

Even with the right advice and loan guidance, property purchases can be expensive. My Finance Agent can provide you guidance in relation to purchasing, investing or rentvesting. You may find it better to rent and buy in the same market, so talk to one of our team on 02 8313 8400 to get started or visit our website for more information.

*Information within this publication has been sourced from the Aussie 'Buy vs Rent' Report, Domain Property and Australian Bureau of Statistics.


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