Third Of Australian Homes Cheaper To Buy Than Rent
Low interest rates and ascendant regional rent prices have seen mortgages look attractive.
< 1 min
Outside Australia’s two most populous major capital cities – Sydney and Melbourne – the incentive to buy a home has never been higher with homes across the rest of the country generally cheaper to buy than rent.
Only 4.9% of homes in Sydney and 7.3% of homes in Melbourne were cheaper to buy than rent, according to a new report by Corelogic.
Elsewhere, between 43% to 96% of other Australian addresses are cheaper to service a mortgage when compared to renting, including Brisbane.
The report showed buying cost less than renting at 36.2% of properties across the country, up from 33.9% last year.
Further, the demand for new homes increased by 15.3% driven by owner-occupiers while rent went up where domestic migration was strong.
Proportion of homes cheaper to buy than rent
| Capital | Percentage cheaper to buy | Regional homes | Percentage cheaper to buy |
|---|---|---|---|
| Darwin | 86.5% | NT | 96.4% |
| Perth | 59.6% | WA | 79.4% |
| Brisbane | 55.3% | Qld | 73.1% |
| Hobart | 50.2% | Tas | 71.4% |
| Adelaide | 47.4% | SA | 47.4% |
| ACT | 43.6 | – | – |
| Melbourne | 7.3% | Vic | 43.6% |
| Sydney | 4.9% | NSW | 48.2% |
| Combined | 26.2% | Combined | 60.1% |
^Source: Corelogic Property Pulse
“The combination of lower rent growth and very strong dwelling value growth has meant that even fewer properties across Sydney are cheaper to pay down a mortgage than rent, at just 4.9 per cent,” said Corelogic head of research Eliza Owen.
“This is down from 7.1 per cent when the analysis was done with the same assumptions in February 2020.”
Owen added results were also indicative of lower interest costs on mortgage debt since the onset of Covid-19.
“However, reduced interest costs have not led to cheaper mortgage serviceability relative to rents in every instance,” Owen said.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Philip Lowe’s comments come amid property industry concerns about pressures on mortgage holders and rising rents
2 min
Leaders in Australia’s property industry are calling on the RBA to hit the pause button on further interest rate rises following yesterday’s announcement to raise the cash rate to 4.1 percent.
CEO of the REINSW, Tim McKibbin, said it was time to let the 12 interest rate rises since May last year take effect.
“The REINSW would like to see the RBA hit pause and allow the 12 rate rises to date work their way through the economy. Property prices have rebounded because of supply and demand. I think that will continue with the rate rise,” said Mr McKibbin.
The Real Estate Institute of Australia today released its Housing Affordability Report for the March 2023 quarter which showed that in NSW, the proportion of family income required to meet the average loan repayments has risen to 55 percent, up from 44.5 percent a year ago.
Chief economist at Ray White, Nerida Conisbee, said while this latest increase would probably not push Australia into a recession, it had major implications for the housing market and the needs of ordinary Australians.
“As more countries head into recession, at this point, it does look like the RBA’s “narrow path” will get us through while taming inflation,” she said.
“In the meantime however, it is creating a headache for renters, buyers and new housing supply that is going to take many years to resolve.
“And every interest rate rise is extending that pain.”
In a speech to guests at Morgan Stanley’s Australia Summit released today, Governor Philip Lowe addressed the RBA board’s ‘narrow path’ approach, navigating continued economic growth while pushing inflation from its current level of 6.8 percent down to a more acceptable level of 2 to 3 percent.
“It is still possible to navigate this path and our ambition is to do so,” Mr Lowe said. “But it is a narrow path and likely to be a bumpy one, with risks on both sides.”
However, he said the alternative is persistent high inflation, which would do the national economy more damage in the longer term.
“If inflation stays high for too long, it will become ingrained in people’s expectations and high inflation will then be self-perpetuating,” he said. “As the historical experiences shows, the inevitable result of this would be even higher interest rates and, at some point, a larger increase in unemployment to get rid of the ingrained inflation.
“The Board’s priority is to do what it can to avoid this.”
While acknowledging that another rate rise would adversely affect many households, Mr Lowe said it was unavoidable if inflation was to be tamed.
“It is certainly true that if the Board had not lifted interest rates as it has done, some households would have avoided, for a short period, the financial pressures that come with higher mortgage rates,” he said.
“But this short-term gain would have been at a much higher medium-term cost. If we had not tightened monetary policy, the cost of living would be higher for longer. This would hurt all Australians and the functioning of our economy and would ultimately require even higher interest rates to bring inflation back down.
“So, as difficult as it is, the rise in interest rates is necessary to bring inflation back to target in a reasonable timeframe.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
