Suburbs where it’s cheaper to buy a home than rent

Renters in a handful of suburbs will find it’s cheaper to pay off a mortgage now that rents have soared and interest rates are falling.

A further string of neighbourhoods offer mortgage repayments on the typical home that are almost as cheap as the median rent in the same area, analysis shows.

Tenants could find cheaper mortgage repayments than their rent in 10 Sydney suburbs, 13 if they were willing to spend $10 more a week, or up to 65 if their mortgage was $100 more a week, analysis from Ubank and Cotality (formerly CoreLogic) shows. These were all unit markets – no house markets were in prospect.

In Melbourne, units in 12 suburbs are cheaper to buy than rent, increasing to 77 suburbs if the tenant can spend another $100 a week, but again, no house markets were achievable.

In Brisbane, 21 unit markets are within $100 a week of the typical rent, and seven house markets, while in Perth there are 85 unit markets and 34 house markets within the $100 a week cut-off.

Across the country, it was cheaper to buy than rent in 7.7 per cent of suburbs analysed, and almost one in five suburbs had median mortgage repayments within $100 a week of the median rent.

The analysis assumes a 20 per cent deposit, a 30-year home loan and a variable rate at the February average of 6.09 per cent, meaning repayments would be reduced even more as banks passed on the May rate cut.

Some of the largest gaps were in regional WA mining towns – up to $673 – because the transient neighbourhoods had higher demand for rentals than ownership.

In the cities, the gap narrowed.

Unit buyers in Melbourne’s CBD and Carlton could save substantially, at $158 and $153 a week, respectively. Renters in nearby inner suburbs such as Docklands, Southbank, North Melbourne and West Melbourne could save about $70 a week.

Renters in Sydney’s Rosehill ($31) and Ultimo ($16) would be ahead if they bought. Likewise from Mascot to Harris Park and Mount Druitt.

Cotality head of research Eliza Owen said rents had risen and remained high while mortgage rates were starting to fall.

She said this allowed tenants fortunate enough to have a deposit to consider: what if they were paying $10 a week more to own a home? What if it was $50 or $100? Some tenants may receive rent hikes of a similar amount.

Owen highlighted the conventional wisdom that rents go up, whereas mortgages go down.

“You can eventually pay off your home, reduce your housing costs substantially and not have to worry about mortgage costs in retirement,” she said.

Owen said the mortgage-to-rent figures were less likely to stack up for houses because they were much more expensive than units.

“For a lot of people in our bigger cities, that is the reality of homeownership nowadays: you probably are looking at something a bit smaller to break into the market,” she said.

“[Upgrading] would probably be tricky because the capital accumulation in units isn’t as strong as in the house market, but at least by breaking into the unit market they can secure something that is their own, often located in a really convenient high-amenity area, and not having to worry about ongoing increases in rents.

“For people willing to reimagine the Australian dream, they might find that transition from the rental market will be in their favour this year.”

Ubank chief home lending officer Ray Jokhan said the bank had been fielding strong interest from first home buyers and investors this year, and customers were closely watching economic conditions.

“Customers are actively exploring their options, with many looking to secure competitive rates that support their financial goals,” he said via email.

“Our home-lending customers tell us that affordability and cost of living are top of mind. Many are looking for ways to reduce repayments or unlock equity; they value transparency and simplicity in the home-lending process.”

Anthony Landahl, managing director at mortgage broker Equilibria Finance, had several conversations with clients about whether it could be cheaper to buy than rent, especially when rents were rising fast – though this overlapped with the rise in the cash rate.

Some buyers had decided to move to a slightly more affordable area to pay the same amount in repayments they had been paying in rent, he said. Many chose units or townhouses as their first home.

The question had come up again now that rates are falling.

“We’re getting a lot of people, particularly the first home buyers, particularly the younger buyers, going ‘can we now get into the housing market?’” he said.

“We’re getting a lot of people now with interest rates trending down having a look at what we can do.”