Aussie Suburbs: Buying Becomes More Affordable than Renting?

The scale of the current housing crisis in Australia has been highlighted by new data showing rents are now so expensive that many tenants would be better off financially by purchasing the home they live in.

The figures put together by real estate number-crunchers PropTrack, show over a third of homes nationally are now cheaper to buy over a ten-year period than to rent.

To arrive at their figures, PropTrack estimated the cost of renting a property for 10 years versus purchasing the same one with a 20 per cent deposit plus stamp duty and annual rate payments.

This data demonstrates just how much rental affordability has declined over the past 12 months, with figures released a year ago by rival property analytics firm Domain finding that in November 2022, it was only cheaper to pay a mortgage on a house than to rent in around one in seven Australian suburbs.

The findings are also surprising, given many owner-occupiers have experienced the sharpest increases in mortgage repayments on record over the past 18 months, as the Reserve Bank raised the cash rate 13 times from an emergency pandemic low of 0.1% to the current 4.35%.

Home values have also recovered from a decline and recently reached new highs, so PropTrack is not suggesting that this phenomenon has emerged because buying a property is getting any cheaper.

Rather it’s because rents have shot up so rapidly.

“A record pace of rent growth – with advertised rents up 14.6% over the past year – has offset higher buying costs in many regions,” says PropTrack economist Paul Ryan.

He also points out that rental price increases are often greater at the bottom end of the market, which is dominated by students, young people and those on lower incomes.

The suburbs where renters would be better buying

In Sydney, Melbourne and Brisbane, suburbs relatively close to the CBD dominated PropTrack’s list.

Botany, Auburn and Parramatta were the leading places in Sydney where it was cheaper to buy than rent, while down south, it was central Melbourne, western parts of the City of Stonnington like South Yarra and trendy Prahran, and the neighbouring City of Port Phillip, which includes St Kilda and Port Melbourne.

Inner Brisbane and the outer south-eastern suburb of Beenleigh got the nod, while PropTrack says most properties in booming Perth are cheaper to buy than rent.

In the south-eastern states, it’s overwhelmingly apartments that make PropTrack’s list, with 43% of apartments in Sydney and 38.5% in Melbourne.

When it comes to houses, though, only 2.2% of houses in Sydney and 1.4% in Melbourne are cheaper to buy than rent. 

That blows out to 74.3% of houses in Perth.

And the fact that it’s cheaper to buy 92.5% of apartments in Perth than rent them is also a clear demonstration of the WA capital’s ridiculously tight rental market.

According to SQM Research, Perth had a rental vacancy rate of just 0.4% in October.

Good news if you have a deposit, bad if you don’t…

PropTrack’s Paul Ryan says that for those who can muster a deposit, buying conditions “remain strongest in Queensland, South Australia and Western Australia.” 

But that also “points to continued upward pressure on prices” in those states.

Mr Ryan questions how many renters would be able to put themselves in a position to purchase a property equivalent to the one they currently live in.

“It would be cheaper to buy, but how do you save that 20 per cent deposit when paying these higher rents?” he says.

PropTrack has calculated that the time to save a 20 per cent deposit has now climbed to 10 years nationally and to 12.6 years in Sydney.

The ANZ CoreLogic Housing Affordability Report for November supports that assessment, finding it would take 10 years for the median household to save up a 20 per cent deposit on the median Australian home.

University of Sydney housing analyst Professor Nicole Gurran told ABC News the PropTrack figures were “depressing”.

“The good news here may be for investors, because they may be able to negative gear.”

“But there is no good news for first home buyers because prices haven't dropped.” 

“And while they're trying to save for a deposit, they're facing higher rents,” she says.