First-home buyers hoping to say goodbye to the rental market are in for some good news, with property market conditions over the September quarter increasing the number of suburbs where it’s now cheaper to pay off a mortgage than pay the weekly rent.
Compared to June there are now 175 additional suburbs across the country where it is now cheaper to buy versus rent, new Domain data shows. Figures in June revealed 150 suburbs nationwide. In September, the number of suburbs increased to 325, with Brisbane home to 123 of them.
Domain research analyst Eliza Owen says this uplift is reflective of overall changes in the property and rental markets over the past quarter.
Number of suburbs where a mortgage repayment on median house or unit property prices is lower than the median asking rent
|September 2019||June 2019|
“The past few months have seen a halving of the cash rate, cheaper mortgage rates, and in some cities falling prices. That combination means that in a lot of areas, both the principal component and the interest costs of a mortgage are reduced,” she said.
“Meanwhile, some areas are seeing tighter rental markets. So that combination of rising rents and lower housing purchase costs means that there are more suburbs where it’s cheaper to pay off a mortgage, than pay for the typical asking rent.”
The savings are calculated using the weekly mortgage repayments of the median house and unit price and comparing this to the median weekly asking rent for properties in the same suburb. Weekly mortgage repayments are based on a 20 per cent deposit and do not include additional expenses related to purchasing a home, like stamp duty.
Ms Owen noted that suburbs which demonstrated savings for buyers were generally lower socio-economic areas and had lower median house prices.
“They tend to be areas where property is cheaper, and what that does is place more pressure on the rental market. There’s more competition on the rental market and that exacerbates the dynamic of rising rents and lower mortgage costs,” Ms Owen said.
In Sydney, Erina is the only suburb in the state where buying a house is cheaper than renting it, with savings calculated to be $44 per week.
In total, Sydney has seven suburbs where units are more affordable to buy than rent. The top of the list is inner-city Barangaroo, where you can save $37 per week forgoing a rental unit. Barangaroo is also home to the country’s most expensive property deal – a two-storey penthouse and a sub-penthouse directly below at One Sydney Harbour.
Many of these buyer-friendly suburbs for units are located in Sydney’s west, with Mount Druitt, Lakemba, Blacktown, Kingswood offering small savings between $2 and $8 per week.
The opposite can be said for Sydney’s waterfront prestige suburbs, says Ms Owen.
“It’s interesting to consider that there’s such a workaround in renting if you want to live in a really nice part of the city or a waterfront suburb,” she said.
Vaucluse, Mosman and Palm Beach had the highest weekly mortgage repayments for houses in the area, with Vaucluse costing an extra $4794 per week to buy versus rent.
In Melbourne, there are 19 suburbs where paying off a mortgage is cheaper, but only for units.
Inner-city Melbourne locations, including the CBD, Carlton, Southbank and Docklands, presented the best savings for unit buyers, with the CBD topping the list with a weekly saving of $104.
“In Sydney and Melbourne, you don’t see as many suburbs because prices are going up as interest rates come down,” Ms Owen said.
The suburb for the smallest weekly median mortgage repayments was Maddingley, in Bacchus Marsh, but would cost buyers on average $22 per week more than if they were renting in the same suburb.
Greater Brisbane recorded the most suburbs – 69 suburbs where buying a house is cheaper than renting, and 54 suburbs where the same applies for units.
“Increase in the suburbs nationally is really being driven by Brisbane, Perth, Adelaide. These are the cities where property prices are falling, even though interest rates are coming down, because of where they are in the cycle,” Ms Owen said.
“Brisbane is a city that’s been in a downswing for the past three quarters. So because of where Brisbane is, a lot of the mortgage costs are getting cheaper for suburbs. For some of these suburbs, people paying off a mortgage could be $100 better off than those renting in the same area.”
For houses, North Booval in Ipswich and Crestmead in Logan had weekly savings of up to $72 and $56 respectively. The same can be said for units in Logan, with Longanlea unit buyers saving $95 per week and Woodridge buyers $94.
However, it was Brendale in Moreton Bay that had the best buy-versus-rent savings, topping the list with $110. Beenleigh, in Logan, topped the list for units, with weekly savings of $98.
Adelaide has 65 suburbs where it’s cheaper to buy than rent, with 55 of these being for houses and 10 for units. North Adelaide is a popular area, with Elizabeth Downs and Elizabeth North allowing buyers to save $95 and $90 on their weekly housing expenses should they buy versus rent.
Like all capital cities apart from Sydney, Adelaide’s CBD was also more buyer-friendly, with savings of $79 per week.
Adelaide’s property market has been a steady long-term performer, but a weakening job market has weighed on demand and saw a -0.6 per cent change to house prices and -5.2 per cent change to unit prices in the September quarter. The drop in prices is a contributing factor in Adelaide’s doubling of suburbs over the September quarter where it’s now cheaper to buy than rent.
It’s no surprise that Perth has a large number of suburbs where it’s cheaper to buy than rent, particularly for houses, at a count of 53.
“I think Perth is a really interesting one. It’s at a unique time in the property cycle where prices are reaching a trough but the rental market is tightening rapidly. Renters will see that they’re having higher housing costs, and it could be a good time for them to buy if they can afford it,” Ms Owen said.
Perth remains a buyer’s market, with buyers benefitting from lower mortgage costs. House prices remain 14.4 per cent below and unit prices are 18.2 per cent lower than record highs in 2014.
Stratton in the east records buyer savings of $75 per week, with Medina and Leda in the south west recording similar savings of $59 and $56 respectively.
In the September quarter, Canberra went from no suburbs where buying was cheaper than renting for houses, to having five. Lawson had the best savings per week of $66, while Coombs, Macgregor, Ngunnawal and Dunlop had weekly savings of $8 to $34.
Despite steady drops in house and unit prices over three consecutive quarters, Canberra’s house and unit prices remain the third highest of the capital cities. However, a 4.4 per cent drop in unit prices during the September quarter means Canberra is home to the cheapest buy-versus-rent suburb nationwide. Unit purchasers in Harrison could be $139 better off per week than renters in the area.
Barton, Franklin and Bruce were also strong suburbs for unit buyers, all with savings over $100 per week.