Melbourne suburban property markets where it’s cheaper to own than rent revealed

Only two suburban Melbourne property markets have cheaper mortgage repayments than rents, among 10 statewide, as interest rate rises heap more pressure on Victorians.

The property markets where it’s cheaper to service a mortgage than a typical rental have been revealed.

There are now only two suburban Melbourne property markets where average mortgage repayments are cheaper than paying rent.

Caulfield East units and Travancore units are the only two house or unit markets across the city where its more cost effective to service a mortgage than a typical tenancy, exclusive research from Finder shows — but even they are teetering on the edge.

They are among just five house markets and four unit markets in Victoria where it is cheaper to service a typical mortgage than pay the median rent, according to Finder, putting more pressure on the rental market as more people are shut-out of buying.

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An apartment at 5 Dudley St, Caulfield East, is available to rent from $325 a week.

244/38 Mt Alexander Rd, Travancore, is for sale with a $315,000-$335,000 price guide.

You could also own 5/5 Lord St, Caulfield East, for $320,000.

Finder head of consumer research Graham Cooke said even though property prices had fallen significantly in the past year, interest rate rises had caused “ballooning mortgage costs”.

“This has meant that houses are less affordable now than before prices went down,” he said.

He said the number of suburbs where renters could enter the property market and pay the same in mortgage repayments had plunged dramatically.

Ray White Oakleigh agent Jonathon Eaves said Caulfield East was a tiny suburb of about 1000 homes and its median unit price could be affected by student accommodation sales.

Its median unit price of $217,500, according to Finder, would equate to typical mortgage repayments of $1067.96, while the median monthly rent was $1365.

Mr Eaves said one-bedroom units had mostly been selling for $300,000-$350,000 recently.

“I think (unit rents) have grown so much in value with an influx of students coming back from overseas attending Monash’s business, commerce and law departments in Caulfield,” Mr Eaves added.

“But it’s also on the train line to get out to Monash Clayton so it’s quite favourable.”

He said the area was also growing in popularity due to the redevelopment of Caulfield Village and the farmer’s market at the racecourse.

“Plus vacancy rates at the moment are less than 1.4 per cent, even days on market for rentals is about 12 days,” Mr Eaves said.

Ararat and Cobram were the other two unit markets where it was cheaper to own than rent.

Of the five house markets, Ouyen, near Mildura, had the largest gap, with a $364.62 difference between monthly rent costs and mortgage repayments, while the small town of Nhill, near the border of Victoria and South Australia, had a $186.13 gap between the two costs.

In Nhill, 2 Clarence St is for sale with a $230,000-$240,000 price tag.

11 Leahy St is also on the market in Nhill for $215,000.

As for the rental market in the western Victorian town, 17 Macpherson St is up for $350 a week.

Other house markets where it’s cheaper to buy than rent were all found northwest of the city, including Warracknabeal with a $179.39 rift between rent and mortgage payments, as well as Donald ($74.18) and Dimboola ($39.81).

Westech Real Estate Nhill agent Joanne Perkins said there was huge demand for rental properties in the border town due to its high employment numbers at both the West Wimmera Health Service hospital and the Luv-A-Duck poultry processing plant.

“We’re always getting tenants coming into the township to work at the hospital, as they’re always looking for staff,” Ms Perkins said.

“There was also a big push about 10 or 15 years ago from John and Margaret Millington, who were in charge of Luv-A-Duck at the time, to find employment for Karen immigrants as there was a big opening for staff required at the factory.”

The town’s population is made up of more than 200 Karen refugees who moved there from Myanmar within the past 20 years.

In Warracknabeal, 57 Lyle St has been listed for $475,000.

Donald houses also produced cheaper mortgage repayments than rental costs, with houses like 46 Hammill St for sale for $230,000.

2 Banksia St in Ararat has a $320,000 asking price.

“It’s also a large agricultural area and there’s a lot of farming people coming here to work in that industry or set up live stock,” Ms Perkins added.

She said the housing market in Nhill mostly attracted local buyers and investors who saw the opportunity for a strong rental yield.

Although repayments are cheaper in a handful of suburbs and towns, a deposit on a home is the biggest barrier buyers face when trying to get on the property ladder, particularly in Melbourne where less than half of suburbs have a median house price under $1m.

Even in Ouyen where the median house costs $190,500 and mortgage repayments are cheaper than rent, buyers would still need to save $38,100 for a 20 per cent deposit.

Finder’s analysis assumed a of a 30-year loan on an average variable discounted owner-occupier home loan rate of 3.6033 per cent and a typical 80 per cent loan to value ratio.

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Originally published as Melbourne suburban property markets where it’s cheaper to own than rent revealed