Falling property prices and interest rate cuts have made it cheaper to buy rather than rent in 388 suburbs and towns around the country, according to a new report.
The RP Data Buy vs Rent report analyses the different between monthly mortgage payments and monthly rental payments based on the median value of houses and units.
The data shows that there has been a 63 per cent increase in the number of suburbs where it is now cheaper to pay a mortgage than pay a landlord over the last few months. Only 238 suburbs fit the criteria back in August.
And if buyers are willing and able to spend an extra $50 a week in mortgage repayments over rent, the number of suburbs where purchasing becomes a viable option rises to 1419,
National research director Tim Lawless said the combination of steep price falls and significantly lower interest rates was creating new opportunities for renters keen to buy a property.
“For many buyers now may be a good time to either re-enter the market or buy their first home,” he said.
“This result highlights the dramatic impact adjustments to mortgage rates can have on housing affordability in the marketplace,” Mr Lawless said.
Apartments more affordable
But would-be buyers hoping to snap up a traditional house will be disappointed. Apartments accounted for about 75 per cent of the 388 suburbs where it’s cheaper to buy than rent.
“Across the capital cities, it is typically apartment-style housing where renting can be more expensive than paying a mortgage. The buy-in price tends to be lower compared with weekly rents, providing a narrower gap between mortgage payments and rental payments,” the report found.
Queensland with 147 suburbs on the list offered the most opportunities for renters to become owners,
NSW had 88 suburbs where it was cheaper to buy than rent followed by South Australia (48), Western Australia (44), Tasmania (30) and Victoria (17).
Regional areas more favourable
RP Data said that the buy v rent equation was most favourable in regional areas, accounting for nearly two-thirds of suburbs where it was cheaper to buy than rent.
In Sydney, Rushcutters Bay, The Rocks and Macquarie Fields were among the 41 suburbs revealed as affordable.
Melbourne, by comparison, put in a dismal showing of just three suburbs, including Docklands, Carlton and Abbotsford.
Fortitude Valley, Oxley and the CBD made the list of 42 suburbs in Brisbane.
How was it calculated?
RP Data’s report compared median asking rents against mortgage repayments based on a 5.9 per cent lending rate. It did not include the extra buying or holding expenses such as council rates, land tax, stamp duty.
The analysis did not consider the potential for capital gains or other costs of ownership, such as stamp duty, maintenance costs or strata title fees for units, but Mr Lawless said it offered a good starting point for renters wanting to take the leap.
What does all this mean?
Putting things into perspective, there are 5,386 suburbs across Australia, which means the affordable buy v rent suburbs accounting for only 7.2 per cent of the total.
But as rents keep rising and if interest rates fall further, the tipping point will come and more tenants will see their rent as dead money and hop onto the property ladder, and the cycle will move on.