Owning units up to $400 a month cheaper than renting in parts of Sydney

Paying off a mortgage has become up to $400 a month cheaper than renting in some pockets of Sydney, despite rents plummeting during the COVID-19 crisis.

Increased housing supply in areas like Parramatta is giving buyers more options. Picture: AAP

Record low interest rates and falling property prices have created a “once in a generation” situation where it is cheaper to own property than to rent it.

New research revealed paying off a mortgage on units in some Sydney pockets has become up to $400 per month cheaper than the typical rent – despite rents also falling in recent months.

Homeowners got some of the biggest savings in areas with a high concentration of new housing, especially high-rise apartments, the analysis of mortgage and property sales data revealed.

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The areas included a cluster of suburbs sandwiched between Sydney Olympic Park and Parramatta such as Granville, Merrylands, Homebush and Guildford.

Paying a mortgage on a median priced unit in these areas was about $100-$430 cheaper per month than renting.

Apartment owners also got considerable savings further west in Penrith and Liverpool.

In Sydney’s south, monthly mortgage costs for units were more than $100 cheaper than rent in Eastgardens, Mascot and Wolli Creek.

Mortgagees got similar savings in Lakemba, Wiley Park, Punchbowl, Bankstown, Arncliffe and Rockdale.

This was assuming the mortgagee had a 3.5 per cent interest rate – marginally higher than the lowest mortgage rate currently on offer from lenders.

Additional costs of home ownership such as strata fees, which vary considerably by building, were not factored in and it was assumed the mortgage holders used a 20 per cent deposit for their purchase.

Freedom Property Investors founder Scott Kuru said the higher entry costs of homeownership were part of the reason it was cheaper to pay down a mortgage than rent in some areas.

Paying a mortgage was cheaper than renting in many of the areas with a high concentration of high-rise apartments.

“Some people can get trapped in the rent cycle,” he said, adding that there were fewer households with the savings needed to purchase property at the moment, but the same families still had to pay rent.

Coupled with the increased supply of housing in the areas, this meant there was less competition for properties up for sale compared to the level of demand for rentals, Mr Kuru said.

Buyer’s agency DDP Property’s CEO Zaki Ameer said there was “a once in a generation opportunity for renters to move into home ownership”.

Mr Ameer estimated monthly mortgage repayments were up to 55 per cent cheaper than rents on same value properties in many instances in Sydney.

The cheaper mortgage costs in many of Sydney’s emerging unit hubs have come despite heavy reductions in rents since the COVID-19 pandemic started.

Rents have been falling in recent months.

CoreLogic’s quarterly rental review report released earlier this week revealed Sydney rents dropped by an average of 1.3 per cent over the three months to June.

But the drops in average rent were largely driven by changes within inner Sydney areas where tenants were mostly overseas students, hospitality workers and travellers in short-term rentals.

“Closed international borders created a significant shock to rental demand,” CoreLogic head of research Eliza Owen said.

Mr Kuru said the fact that it was cheaper to pay off property in so many areas suggested that the state government should put more focus on lowering the entry costs of home ownership.

“Most households can afford to pay off (a home loan) but saving the $100,000 or more you’d need for a deposit is too hard,” he said.

“Billions of dollars are being thrown around at the moment but more should be done to help families get a home.”

Mr Kuru said the state government’s announcement this week of an extension of stamp duty exemptions for buyers of new properties priced under $800,000 needed to go further.

“All it’s going to do is help the people who were already ready to buy something, the people who can already afford a deposit. It does nothing for the people who can’t get there.”

AVERAGE MONTHLY SAVING OWNING VS RENTING (units)

Granville $430

Homebush $306

Eastgardens $265

Lakemba $261

Liverpool $257

Penrith $241

Sydney Olympic Park $234

Mascot $233

Merrylands $231

Punchbowl $222

Wolli Creek $215

Originally published as Owning units up to $400 a month cheaper than renting in parts of Sydney