Mortgage repayments now cheaper than rent in some Australian suburbs
A Guardian Australia analysis finds that in one in ten Australian suburbs and towns, typical mortgage repayments exceed rent by less than $200 a week, and in some they are lower. Rents are rising while property prices are flat after recent falls.
Rents in Australia keep climbing while property prices have recently fallen, and in dozens of suburbs taking out a mortgage is now nearly as affordable as renting, or even cheaper. That is the finding of an analysis by Guardian Australia, based on data from the property data firm Cotality.
In one in ten suburbs and towns nationwide, weekly repayments on a typical property are less than $200 above the rent. National median rent rose 5.5% in the year to September to $713 a week. The median price of houses and units combined was flat over the year, following six months of steady declines.
How the figures were calculated
The analysis assumes a new 30-year loan covering 95% of the property value at a 6.2% interest rate, and leaves out any additional costs. A bigger deposit would make repayments lower still. Buyers with a 5% deposit would typically use the government's low-deposit scheme, which is designed for first home buyers.
In Melbourne, the typical apartment rent is $628 a week, up 4.8% over the year. Repayments would be $839 a week, or $211 more, based on a median value of $624,740, nearly $25,000 lower than a year earlier. In Carlton, the Melbourne CBD, Notting Hill, Travancore and Southbank, repayments were below rent.
In Sydney, repayments were only about $100 a week above rent in several suburbs, including Ultimo and Liverpool. In the Canberra suburbs of Belconnen and Phillip the gap was under $75 a week. In Darwin, where rents rose 11.6% in a year, buying was cheaper in a quarter of suburbs.
What experts say
Clint Waters, a Melbourne mortgage broker, said interest in buying had dropped but renters were enquiring in strong numbers as they weighed lower prices against higher rents. He said a stable or growing number wanted to buy directly from their landlord.
Gerard Burg, a Cotality researcher, said cheaper buying tended to occur in areas with heavy apartment development, and described these as anomalies. Houses generally remain more expensive to buy than rent. In Darwin, most such areas are mining or resource project locations where fly-in fly-out workers rent temporarily. Burg said repayments could fall further if the Reserve Bank holds rates steady and values keep declining.
