Buying ‘now cheaper than renting for many’

According to new data, 27 per cent of homes across Australia are more cost-effective to buy than rent over the next 10 years.

According to new data, 27 per cent of homes across Australia are more cost-effective to buy than rent over the next 10 years based on current prices. Picture: NCA NewsWire / Gaye Gerard

Buying is now cheaper than renting for almost a third of Australian homes, as expected interest rate increases make it harder for homeowners to make repayments.

PropTrack’s latest Buy or Rent Report has found 27 per cent of homes across Australia are more cost-effective to buy than rent over the next 10 years based on current prices, despite exceptional price growth over the past two years.

Cheaper price points in smaller capital cities and regions means buyers can get better value from their purchases than those in Sydney and Melbourne, which is making the likes of Brisbane and Adelaide more competitive.

PropTrack economist Paul Ryan said continued price ­increases combined with higher-than-expected interest rates had made buying a less attractive ­option for now.

“Mortgage rates have already increased 75 basis points in 2022 so far, with further increases expected,” Mr Ryan said.

“Combined with strong growth in home prices – which are up 14 per cent – renting has become a more affordable option across most of the country now compared to a year ago.

“The balance between the costs of buying and renting provided by this analysis suggests price growth will continue to be slow over the next year, and rent growth will be strong.

“These trends would rebalance the costs of buying and renting towards buying.”

In NSW, it is cheaper to buy than rent only 9 per cent of properties, given the massive price increases through the recent boom. Sydney was particularly impacted, with renting houses cheaper than buying almost everywhere across the city.

The margin is even tighter in Victoria, where buying beats out renting in only 7 per cent of cases but, at least in Melbourne, there are pockets in the north, east and west of the city that provide affordable house options for buyers.

This is in contrast Queensland, where buyers have the choice of moving into more than half (51 per cent) of properties and being better off, with the most affordable options in Brisbane being in suburbs to the south and southwest of the CBD. In South Australia, it is cheaper to buy than rent 34 per cent of properties.

PropTrack’s model for the report took into account the total fin­ancial costs of buying (including repayments, maintenance and taxes) and renting (such as bond), alongside assumptions of future price movements of selling and renting markets.

The data comes despite Australia’s rental crisis worsening over the past year. Only 1 per cent of Australia’s capital city rental properties were advertised last month – well below the healthy level of 3 per cent – which has helped push rents up 15.6 per cent over the past year, according to SQM Research figures.

Property is long-game, Ray White chief economist Nerida Conisbee said, noting that homeownership has extra benefits to renting. “The reality is, it is always cheaper to buy as you get growth in equity and repayments over time will be cheaper in relative value to your home,” she said.

Predictions around market declines and rate rises have all but caused first-home buyers to flee the market, according to Real Estate Buyers Agents Association president Cate Bakos. “If we have first-home buyers sitting out and renting, it will become even more expensive in contrast to buying a home,” Ms Bakos said.