The Suburbs Cheaper to Buy Property than Rent

Could the gap between renting and owning a piece of Australian real estate be narrowing?

Despite the nation’s cooling housing market over recent years, home affordability is an ongoing issue with five of Australia’s major housing markets ranking last year as “severely unaffordable”.

But thanks to some data crunching, property portal Domain has identified Australian suburbs in major capital cities where it’s cheaper to buy a home than rent one.

With the reserve bank cutting rates twice in the past six weeks to historic lows, falling interest rates is the main factor creating affordability for first home buyers, bringing the typical mortgage rate down to around 3.5 per cent, with forecasts it’s likely to go lower.

Too good to be true?

While some suburbs in the findings may not be worthwhile investments, Domain research analyst Eliza Owen says the data is a tool to provide would-be home buyers insight to the local property market.

“We thought it would be an interesting data set, particularly in giving hopeful home buyers perspective in what housing costs can be,” Owen told The Urban Developer.

The standout suburbs?

Owen says the biggest surprise from the findings was the buying options for units located in inner Melbourne and inner Brisbane.

“In these suburbs, it was actually cheaper to pay off a mortgage on that typical purchase point than it was to rent,” Owen said.

“So inner city suburbs of Brisbane like Bowen Hills, Fortitude Valley and Spring Hill have an average rental premium of $57 in rent over the median mortgage repayment.

“Melbourne’s inner city suburbs included Southbank, Melbourne, and North Melbourne with the data showing it worked out to be around $1000 to $2000 cheaper annually.”

Domain compared rent and mortgage repayments across 42 per cent of greater Sydney, but Lakemba was the sole suburb that showed up in Sydney’s findings, with a mortgage repayment on a comparable property cheaper by $1 per week than the median rental price.

But Owen said there are suburbs across greater Sydney where first home buyers could consider buying in if they were able to increase the weekly budget by up to $100.

“They were mainly the western suburbs of Sydney and the northern part of the central coast, areas like Blue haven for example,” Owen said.

“In Blue Haven there was about $35 in the difference between the mortgage repayments and median asking rents.”

While in Queensland, taking in greater Brisbane, Domain saw a spread of 45 suburbs across both housing and unit stock show up in the results.

The calculations

Domain looked at what it costs to buy for a typical first home buyer armed with a 20 per cent deposit, as a key assumption. No added costs are included, such as transfer duties, strata or council rates.

The analysis is based on sales and rent data over the 12-months to April, and the results only includes suburbs that had a minimum of 50 rental and sale observations over the year to April.

Weekly mortgage repayments are based on the median house or unit price for the suburb, on a mortgage rate of 3.5 per cent, taking in the recent cash rate cuts.

Sydney

Melbourne

Brisbane-Greater Brisbane