It’s now cheaper to rent than buy across Australia’s housing market

Despite housing rents surging across Australia over the pandemic:

Australian rental growth

Australian rental growth boomed over the pandemic.

It has become increasingly cheaper to rent than buy, according to the latest PropTrack Buy or Rent Report:

Cost of buying versus renting
  • It is cheaper to buy than rent around 27% of homes across Australia. This is down sharply from this time a year ago, when this figure was just above 50%.
  • However, conditions differ significantly based on property type. More than a third of units across the country are estimated to be cheaper to buy than rent over the next 10 years.
  • In NSW, it is cheaper to buy than rent only 9% of properties. Price rises across Sydney have made renting houses cheaper than buying almost everywhere cross the city.
  • In Victoria, it is cheaper to buy than rent only 7% of properties. Despite this, pockets in the north, east and west of Melbourne provide affordable options for buyers.
  • In Queensland, it is cheaper to buy than rent 51% of properties. In Brisbane, suburbs to the south and south-west of the CBD provide affordable options for buyers.
  • In South Australia, it is cheaper to buy than rent 34% of properties, while in Tasmania, it is cheaper to buy than rent 41% of properties.
  • In Western Australia, it is cheaper to buy than rent 62% of properties, while in the ACT, it is cheaper to buy than rent 29% of properties.

With interest rates on the rise, the financial scales should continue to shift in favour of renting.

The futures market has forecast an official cash rate (OCR) of 4.3% by May 2023. This would drive the average discount variable mortgage rate to 7.7%, which is more than double its pandemic low of 3.45%:

Australian mortgage rates

Australian mortgage rates to double under futures market’s forecast.

In turn, average principal and interest repayments on a typical Australian mortgage would rise by around 50% under the futures market’s OCR forecast.

Based on the above table from PropTrack, Sydney and Melbourne would be hardest hit based on their poorer affordability and their wider gap between the cost of renting and buying.

Unconventional Economist

Comments

  1. Camden HavenMEMBER

    This is a nonsensical angle. Renters are always compared to most recent buyers. You bought in 2013 your current home, how does that relate to renting?

  2. MathiasMEMBER

    Be a vagrant.

    Live out of your car, drive bush, setup a veggie garden and live rent free.

    If the coppers show up, just drive 200 meters down the road and set it all up again. What can they do?

    Australias a bloody big country and there’s land all around us.

    Get your car converted to electric. You dont need petrol. Just throw up some solar panels, charge the batterys from the sun everyday and you’ve got electricity and fuel to last you another 150 miles.

    Trade Forex. You dont need much money to survive when you have no bills, grow your own food and do everything for yourself.

    Besides… it makes the Baby Boomers so mad… because who’s going to pay there pensions if you wont? bahahahahahaha

    Fk Em. Fight the system. Its the only way to be.

    ( The irony is I was an honors student at Uni lol. Yeah, 6.8 out of 7.0. With all that skill and talent, what do I do? I stick it to the man lol )

  3. alwaysanonMEMBER

    It was interesting/surprising when it was cheaper to buy then rent – as you’d assume that renting should be cheaper (as your rent should cover maybe interest but not full P I repayments of a mortgage – and certainly not if you include rates and/or strata and water and repairs etc.). It’s why negative gearing has been such a thing. You can argue that you are not building principal value/wealth when renting – but I would expect renting a place to usually be cheaper than buying it historically as far a monthly payments to live there are concerned.

    These emergency interest rates flipped the normal order of things for awhile where ‘renting from the bank’ was cheaper than from a landlord. Now it is going back to normal…

    • Bill the Boomer single handedly, and on a daily basis, trying to raise the profile of his WA investment properties.

      What are you gonna do Bill when TSHTF and the CCP decides that rather than pay for their iron ore they just come on down and annex one of the most isolated areas IN THE WORLD? You guys even struggled when the highway was flooded last year.

      • Imagine if Cottesloe property reverts to 1992 prices. Sweet Dreams are made of this…Perth a big mining town whose fortunes follow Boom Bust Boom Bust cycle

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