Sydney suburbs where its better to rent than buy: would-be buyers encouraged to start saving

Rents may be skyrocketing in much of Sydney, but there are city pockets where landlords are still struggling to attract tenants and where renters are better off than homeowners.

Popular opinion is that buying a home is better than pouring money into a rental, but new research has found there are actually a number of suburbs across NSW where you’re better off being a tenant than a homeowner.

The study by lender Well Money showed many units in the inner and middle suburbs of Sydney have above-average vacancy rates, which limit their rental growth – good news for tenants, bad news for property investors.

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Units and apartments in Miller are available to rent for under $400.

Over the next few years, many high rise residential developments are being built to reduce demand and put downward pressure on prices.

According to WellMoney CEO Scott Spencer, a buyer with a budget of up to $600,000 could buy a unit in about 30 per cent of the suburbs in Sydney.`

“Many Sydney unit markets have subpar long-term growth potential, compared to houses. That’s because it is the land component of a property that appreciates, not the building, and units have low land-to-asset ratios,” Mr Spencer said.

Areas like Sefton have a high supply of new units.

“That’s why if you want to live in a Sydney unit, it might be better to do so as a renter than an owner. Another point worth mentioning is that even though Sydney vacancy rates are falling, making life harder for tenants, a future increase in unit development would mean a higher vacancy rate, which would put downward pressure on rental rates.”

Unlike many of the top suburbs for buyers to rentvest which are located in predominantly regional and coastal areas, some of the most affordable suburbs to rent in NSW are within 30 minutes drive to Sydney’s CBD.

Well Money CEO Scott Spencer.

The southwest suburb of Miller, located 38km from the city, tops the list of the most affordable locations where its better to rent than buy with a median weekly rent of $220.

Units in Narellan have a 3.7 per cent vacancy rate and a number of new units are under construction.

The Western Sydney suburb of Sefton in the Canterbury-Bankstown area is second on the list, with a 2.1 per cent vacancy rate for units. Median weekly rent is $400.
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Suburbs like Narellan often include older homes to rent.

Sefton falls under the $600,000 to $700,000 budget range, which would allow buyers with that budget to purchase a unit in 50 per cent of the suburbs in Sydney.

Mr Spencer said the construction of new units will be a positive for tenants, but negative for owner-occupiers and investors.

“An increase in the supply of rental units will mean a decrease in tenant demand, which will put downward pressure on rents. Similarly, an increase in the supply of units for sale will mean a decrease in buyer demand, which will put downward pressure on prices.”

Certain councils are authorising more high-rise developments.

“As Sydney’s population keeps growing, councils will inevitably authorise more high-rise developments. That means there will be an increase in units’ share of the housing pool.”

“Units can be wonderful places to live, so a lot of people are rightfully happy to live in one or own one. However, whether we like it or not, units tend to experience lower price growth and rental growth than houses. Therefore, if financial returns are important to you, it might be better to consider buying a house instead.”

TOP 5 SUBURBS WHERE IT’S BETTER TO RENT THAN BUY

(By Weekly Unit Rent)

#1: Miller – $220 per week

#2: Sefton – $400 per week

#3: Narellan – $430 per week

#4: Wentworthville – $430 per week

#5: Asquith – $490 per week

Originally published as Sydney suburbs where its better to rent than buy: would-be buyers encouraged to start saving