Renting still cheaper than buying, says PropTrack

Rising interest rates have made renting the cheaper alternative to buying even after the spectacular rise in tenant costs, says PropTrack.

Renting is still cheaper than buying after the spectacular rise in costs for tenants over the past two year, according to housing data firm PropTrack. Picture: NCA NewsWire / Jeremy Piper

Despite rapidly rising rental costs over the past two years, it is still cheaper to rent than buy four in five homes around the country.

Analysis by housing data firm PropTrack found that at the end of 2022, some 21 per cent of homes in Australia remained cheaper to buy than rent after interest rates spiked in reaction to inflationary pressure.

Fewer than 7 per cent of homes in NSW and Victoria were cheaper to mortgage than rent, while Darwin is the only capital city where locals benefit from owning as the majority of homes (94 per cent) are cheaper.

Nine consecutive interest rate rises since May have increased repayments on the average $500,000 loan by about $12,000 each year, outpacing any benefit for buyers from the 4.51 per cent national falls from boomtime peaks.

Repayments are also proving more expensive than rental costs, despite those facing massive increases of about 20 per cent over the past two years.

PropTrack economist Paul Ryan said housing affordability had worsened in recent months, with the number of homes more attractive to buy shrinking over the final half of last year.

“Prices are a bit out of line with rental costs, and that’s the kind of the thing driving our forecasts,” he said.

PropTrack anticipates the property market will experience price falls of about 10 per cent nat­ionally through 2023 if the Reserve Bank raises the cash rate 50 basis points. If any more than one more rise of 0.25 per cent occurs, the falls could be deeper, particularly down the east coast.

Relative affordability is best found in Queensland (40.1 per cent of homes cheaper to buy) and Western Australia (57 per cent). It is relatively cheaper to buy 17.9 per cent of homes in South Australia and 22.5 per cent of properties in Tasmania and Canberra, which is largely in line with the national average.

Mr Ryan said the relative affordability of renting put more pressure on an already stressed marketplace as fewer people choose to transition to home ownership.

“How do the interest rate increases affect rental markets? One of the ways that happen is it makes buying less attractive,” he said.