Australia’s most elite postcodes where renting is far cheaper than buying

Australia’s most prestigious postcodes are not just rich pickings for buyers – they are also a renters’ paradise.

The gap between monthly rent prices and the cost of a mortgage is greatest at the elite end of the market, by up to several thousands of dollars, Domain research shows.

Domain senior economist Joel Bowman considered the question: Is it cheaper to buy or rent? He compared mortgage repayments to rent prices across Australia and found a pattern that plays in favour of tenants who desire an enviable lifestyle.

“At the very premium end,” he explains, “you get the largest gap where it is a lot cheaper to rent compared to buying.”

Data reveals it costs $7913 more per month to pay off a home loan in Bellevue Hill, in Sydney’s harbourside east, than it is to rent there.

Bellevue Hill topped the list in NSW, followed by Vaucluse (+$5008), Mosman (+$4118), Northbridge (+$3777) and Rose Bay (+$3523).

Toorak in Melbourne’s inner-east is number one in Victoria (+$3240), ahead of Canterbury (+$2155), Balwyn (+$2072), Malvern (+$2053) and Middle Park (+$1955).

In Bellevue Hill, Toorak, Vaucluse, Mosman, Northbridge, and Rose Bay, the percentage of renters is higher than that of owner-occupiers with a mortgage, according to the last census.

Try before you buy

Martin Stark has been a resident of Mosman for 25 years – first as a renter and now as an apartment owner.

The author, a leadership and motivational speaker, originally from the UK, has found pleasing parallels between Mosman’s foreshore and the coastline of Spain. It is a large part of the postcode’s appeal, and a factor that eventually converted him from a tenant to a home owner.

Stark tested Mosman in the year prior to emigrating, staying with a friend in the suburb. He quickly knew it was right for him.

“Going down to Balmoral beach on a Sunday afternoon, coming from the UK, felt like I’d been away to Barcelona for a weekend, but it was a five-minute walk.”

The suburb made such an impression on him that when he decided to buy, there was no other choice.

“Mosman was my home,” he says. “I just needed to find a way to live here permanently, and buying was the right way of doing that.

Taking the long view

Bowman says high-end buyers will pay multimillion-dollar prices to reap future financial benefits.

By contrast, renters seek fair value and lifestyle, but without the same promise of capital gains, they won’t stretch their budgets as far as a purchaser.

“The expectations of capital gains, especially if they’re an owner with tax exemptions, can attract a premium,” Bowman says. “However, the rental pool is not interested in that – it doesn’t benefit them to the same extent.”

Although rental yields in these suburbs are softer due to the disparity between a lease and a home loan, the long-term benefits are precisely what investors are after, buyers’ agent Steve Palise says.

Negative gearing is attractive, coupled with the assurance that comes with postcodes that have a track record.

“They are all statistically long-established areas,” the founder of Palise Property says. “You can get repeated data for the last 30 to 50 years and so they are very low risk in regards to capital growth over the long term.”