Don’t rent here: Suburbs where it’s cheaper to buy home than rent
Homes in many Sydney areas now cost $100 a week cheaper to own than rent after the latest rate cuts. See where buyers get the biggest savings
Sweeping interest rate changes this week have made buying a home cheaper than renting one in a growing cohort of suburbs – with experts warning renters with the means to buy should act quickly.
New analysis has revealed repayments on an average unit have become cheaper than market rent in 26 Sydney suburbs, leaving new buyers over $100 a week better off than renters in some areas.
It’s an increase from the 18 suburbs where this situation existed prior to the Reserve Bank’s Tuesday announcement of another 0.25 per cent interest rate cut.
These suburbs included areas near Parramatta and the airport, plus parts of the southwest, according to the Finder.com.au comparison of median rents, home prices and loan costs.
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Finder.com.au finance analyst Taylor Blackburn said the study showed how much of a difference the latest rate cuts were having on homeowner finances.
“To own or not to own is an age-old question, but the answer is usually not that buying is cheaper than renting,” he said.
“There are a handful of suburbs where your monthly repayments might be less than the average rent … very few renters are successfully arguing for rent decreases but homeowners can do this with a rate cut.”
SEARCH FOR YOUR SUBURB HERE TO SEE IF IT’S CHEAPER TO OWN OR RENT
The analysis assumed the buyers bought at the median unit price in their area, used a 20 per cent deposit and paid an average loan rate. Repayments were then compared to median rents.
Additional costs of homeownership such as stamp duty, strata fees and council rates were not included in the analysis.
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One of the suburbs where new buyers got the biggest savings by exiting the rental market was Haymarket, south of the CBD.
Median rent was an average of $123 per week costlier than repayments on units priced at the suburb median following this week’s cut, Finder noted.
Unit buyers in Winston Hills, near Parramatta, would get similar savings of about $121 per week.
Other suburbs where unit repayments were cheaper than rent included Parramatta region suburbs Granville, Harris Park, Merrylands, Guildford and Merrylands West. It was also cheaper to be a homeowner in Mascot and, in the southwest, in Wiley Park and Lakemba.
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And there could be even bigger savings for homeowners later this year if the Reserve Bank announces another cut – the expectation of most economists and major banks.
Another 0.25 per cent rate cut, if passed in full by lenders, would make repaying a loan on a home at current prices cheaper than renting in a total of 35 Sydney suburbs.
Suburbs set to favour homeowners after another cut included Liverpool, Zetland, Parramatta CBD and nearby suburbs Westmead and Wentworthville, among others.
There would be an additional 50 suburbs in regional NSW where renters with deposits would be better off taking the plunge into homeownership.
Aussie Home Loans broker Kim Horan, who handles loan applications primarily across Western Sydney, said renters were beginning to pick up on the savings they could get by purchasing.
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“Increases in rent have made a lot more renters realise they need to buy,” she said.
“Certainly in Western Sydney it’s often the case that units will be cheaper to own because the prices are a bit lower but the rents have really gone up in the last five years.”
Renters Luke and Bobbie Carroll said knowing that renting may cost more than owning was a strong motivator to exit the tenant pool.
“We really want to buy this year,” Ms Carroll said. “We are paying about $100 more a week in rent than we used to and we keep hearing horror stories from friends about their rent increases.
“Knowing it would be cheaper to pay off a loan, and we’d get some of the equity, it’s made us realise we really shouldn’t be renting for much longer.”
Housing experts said home buyers who acted quickly would reap the biggest benefits as interest rate cuts are also expected to push up prices later this year.
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Canstar data insights director Sally Tindall said the key challenge for buyers would be to get into the market, which rate cuts would not make any easier.
“It’s unlikely to help them get a foot on the property ladder faster,” she said, adding that buyers getting increased borrowing capacity could push up prices.
“When buyers see their maximum borrowing budgets rise at the same time … the biggest winner in the equation is often the person selling the property.”
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Originally published as Don’t rent here: Suburbs where it’s cheaper to buy home than rent