The Adelaide suburbs where it’s cheaper to pay off a mortgage than rent
Record low interest rates and rapidly rising rents are making it cheaper to pay off a mortgage than rent in many Adelaide suburbs.
SA News
Don't miss out on the headlines from SA News. Followed categories will be added to My News.
Tenants and first home buyers looking to get a foot on the property ladder can breathe a sigh of relief as a new report reveals the price gap between buying and renting is narrowing.
The Aussie Buy v Rent report, exclusively provided to The Advertiser, reveals the proportion of Adelaide suburbs where the cost of paying a mortgage is less than rental repayments has increased over the past five years.
Commissioned by mortgage broker Aussie in partnership with CoreLogic, the report is good news for those hoping to get off the rent roundabout.
“Under the discounted variable mortgage rate scenario, five years ago only 11 per cent of suburbs were more affordable to pay down a mortgage on a house than rent,” it read.
“By September 2020, the proportion had increased to 35 per cent.
“The trend across the unit sector has been similar but more amplified.
“Five years ago the proportion was 20 per cent compared with 73 per cent on September 2020 numbers.”
The proportion was higher under a three-year fixed rate mortgage, the report said.
“Sixty six per cent of suburbs were more affordable to make mortgage payments on a house than renting, while 100 per cent of suburbs were cheaper to repay a mortgage for units than renting,” the report said.
The largest savings for houses were across the northern suburbs, while the top 10 areas for units were more diverse.
The analysis considered a principal and interest loan on both a discounted variable rate at 3.65 per cent and a three year fixed rate of 2.35 per cent over 30 years.
It is based on the assumption the purchaser is borrowing 90 per cent of the value of the home and the principal is calculated at 90 per cent of the suburb median house and unit value.
Capital appreciation, transaction costs and other fees associated with home ownership and renting haven’t been considered.
The report said the trend towards cheaper mortgage repayments across Adelaide was attributed to lower interest rates, as well as the fact that rents have generally risen at a faster pace than housing values over the past five years.
LJ Hooker Craigmore/Elizabeth agent Andrew Rose said record low interest rates and increasing rents in the northern suburbs were making it cheaper to pay a mortgage.
“The reason rents are going higher and higher and higher is there are no rentals left,” he said.
“The rental market is the strongest I’ve ever seen – you go to an inspection and there are 20 people.”
David and Deanna Lambert recently bought a house in Smithfield Plains for $189,000 after renting for 20 years, most recently in Elizabeth East.
They were paying $1350 a month in rent but are now paying $720 a month on their mortgage.
Even after other costs associated with owning, Mr Lambert said they were better off.
“We’re still $250 a month better off than when we were renting,” he said.
“It feels a lot better because we know it’s not dead money and we can do what we like to the house, it’s a blank canvas for us.”
Aussie chief executive James Symond said it was a good time to consider buying as interest rates were low, government schemes were offering financial assistance and border restrictions made it easier to save for a deposit.
“If not now then when? Especially for first home buyers,” he said.
Mr Symond said many people were already taking advantage of the conditions with loan pre-approvals on the rise.