Despite double-digit rental increases over the past year alongside a 9% peak-to-trough decline in national home prices, new data from CoreLogic shows it is still cheaper to rent than buy across 90% of Australia’s suburbs:
Only 9.1% of suburbs were deemed to be cheaper to buy than rent for houses, down from 30.2% of suburbs at this time last year, according to CoreLogic’s survey of 3,904 house and unit markets nationwide.
Just 16% of suburbs, down nearly 30 percentage points from 45.2%, are still more affordable to buy than to rent a unit.
In every neighbourhood of the ACT, Melbourne, and Sydney, houses are more affordable to rent than buy, while in every suburb of Hobart, Sydney, regional South Australia, and regional Tasmania, a unit was more affordable to rent than buy in February 2023.
A number of additional cities and rural areas are also on the verge of eliminating any suburbs where buying a property is less expensive than renting.
“Despite a double-digit surge in rents nationally, exacerbated by a shortage of rental properties, record levels of net overseas migration and more people returning to major cities for work and studies, the proportion of suburbs where it’s cheaper to rent than buy has increased exponentially in the past year”, CoreLogic’s Director of Research Tim Lawless said.
“There is no doubt the cost to service a mortgage compared to rent is keeping people in rental accommodation, adding to the extreme pressure on rental demand at a time when supply levels have not responded”.
“While many tenants might see home ownership as a way of breaking out of the rent cycle, it’s just not possible for many because the cost to service a mortgage has become even more onerous in the past year with the increase in repayments outstripping the increase in rents by some margin”, Lawless concluded.
While housing values have fallen 7.9%, or roughly $70,000, from their median value over the previous year, rentals nationwide have jumped 10.1%, or about $225 more per month.
By comparison, the 325 basis point increase in the cash rate to February 2023 will result in an increase in mortgage payments of almost $774 per month.
