Renting is not cheaper than owning a home in every suburbs and there are many areas where buyers are better off each week.
An economic shift has flipped the property market on its head, creating a situation where tenants in hundreds of suburbs are paying more to rent their homes than they would to own them.
New analysis from Finder has identified pockets where the maths has flipped due to extreme rental surges, leaving tenants paying more in rent than would pay in mortgage costs on a home of their own.
Finder noted there were 232 suburbs in Australia where it was cheaper to pay off a mortgage for a home than rent one, assuming the buyer had funds for a 20 per cent and stamp duty.
Western Australia offered particularly high savings for buyers due to staggering rent rises over recent years, with 60 per cent of unit markets in the state offering apartments cheaper to own than buy.
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The research warned this “cheaper to own” phenomenon relies on the buyer getting an average interest rate (currently 5.53 per cent) and a 20 per cent deposit on a home priced at the suburb median.
The analysis does not factor in the other costs of homeownership such as strata fees, council rates and insurance. The assumption is also that tenants would pay at the median weekly rent in their area.
Finder’s head of consumer research Graham Cooke said savings for homeowners were dependant on their deposit sizes.
Finder.com.au head of consumer research Graham Cooke said the rent versus buy equation was very different for those using small deposits because of the higher interest costs.
This was especially true for those accessing the government’s First Home Guarantee Scheme, which supports buyers with deposits as low as 5 per cent.
“Low deposit schemes have been touted as a solution, but they also come with a hidden sting,” Mr Cooke said.
“By borrowing more, you could face higher interest costs that would disqualify around half of the ‘affordable’ suburbs found in this analysis.”
Still, for those who do have a 20 per cent deposit and funds to pay for stamp duty, there were plenty of areas in each state where loan repayments were cheaper than rents:
WESTERN AUSTRALIA
Western Australia has emerged as the epicentre of this property inversion, with 60 per cent of suburbs across the state offering units cheaper to own than rent (due to large rent hikes).
For those who had a 20 per cent deposit, units were an average of $134-$175 per week cheaper to repay than rent in the Perth suburbs of Northbridge, the Perth CBD, Ascot, Balga, Glendalough, East Perth, Lathlain and West Perth.
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Units in many of Perth inner suburbs where cheaper to own than rent.
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Other suburbs offering savings, between $100 and $130 per week, included Westminster, Kewdale, Redcliffe and Wilson, according to the Finder analysis of PropTrack median data.
WA had the suburb offering the largest savings in the entire country: Pegs Creek, a suburb of mining service centre Karratha. A unit in the suburb was an average of $650 a week cheaper to own than to rent.
Similarly, in Port Hedland, unit owners were $411 better off per week than renting. It should be noted much of the community are FIFO workers and most purchasers are investors.
QUEENSLAND
Queensland had nearly 300 suburbs identified as cheaper to own than lease, with savings of up to $300 a week.
There were eight southeast Queensland suburbs where homeownership delivered savings over renting. Picture: Chris Higgins
In South East Queensland, the opportunity was in apartments. There were eight suburbs in the region where mortgage repayments undercut rents for those with 20 per cent deposits.
While median rents in the state have hit a record high of $670 a week, the opportunities for cheaper homeownership were mostly in regional areas.
NEW SOUTH WALES
Paying off a mortgage was cheaper than renting in 48 suburbs across Greater Sydney. This has followed a 15-20 per cent annual lift in rents in some areas.
A pressure cooker sales environment makes entering the market difficult, but those who land a foot on the ladder are often better off each week than renters. Picture: David Crosling
There was not a single suburb within 50km of the Sydney CBD where paying off a house was cheaper than renting, but the unit market offered relief for those with a 20 per cent deposit.
Servicing a loan at the local median unit price was over $100 a week cheaper than renting within high density suburbs Haymarket, Chippendale, Mascot and others.
SOUTH AUSTRALIA
The Finder.com.au analysis of PropTrack figures showed 4 per cent of house markets and 7 per cent of unit markets in the state were now cheaper to buy into than rent.
Apartments in the Adelaide CBD were an average of $35 per week cheaper to own than rent.
Units in Tonsley, in the city’s south, offered an average saving of 194 per week for owners compared to tenants.
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The southern Adelaide suburb of Tonley offers some savings for buyers.
Options for house buyers were tight, with Woodville Gardens the only Adelaide suburb where repaying a house loan was cheaper than renting.
The most explosive savings were in remote mining towns. In Coober Pedy, buyers could save a massive $179 per week by repaying a loan rather than renting.
In Roxby Downs, the typical saving was $117 per week. It’s worth noting most buyers in these mining areas are investors and the analysis suggests they are getting huge rental returns.
VICTORIA
Inner Melbourne suburbs where weekly mortgage repayments on a typical unit were lower than the median rent included Brunswick East, Prahran, St Kilda East and more.
An 80 per cent loan on an average unit in some of these areas would incur weekly repayments of $650 to 680. Average rental costs in the same areas ranged from $700 to $800 a week.
TASMANIA
Tasmania had 10 suburbs where buying a house with a 20 per cent deposit was cheaper than renting and four suburbs where unit buyers got savings.
Most were in regional Tasmania, but there were three suburbs within Hobart where the equation stacked in favour of homeowners.
Hobart had three suburbs where owning a home was cheaper than renting.
They included Gagebrook, Bridgewater and Clarendon Vale. Gagebrook offered the biggest savings, with houses at the median price costing an average of $58 per week cheaper to repay than rent.
The biggest savings across the whole state were in Queenstown, where houses were an average of $123 per week cheaper to own.
Savings were also available for house owners in the Launceston suburbs of Mayfield, George Town and St Marys.
NORTHERN TERRITORY
Northern Territory offered considerable savings for those prepared to buy versus rent.
Houses in 42 suburbs, or close to 80 per cent of all Territory suburbs, were deemed cheaper to own for those with 20 per cent deposits.
Renters pay more than homeowners in some instances across the Northern Territory.
The biggest savings were on offer in the Darwin suburb of Berrimah, where paying off a house at the median price opf $333,000 was an average of $500 a week cheaper than paying the suburb’s $850 median weekly rent.
The saving for unit buyers in the Darwin CBD was about $200 per week and about $100 per week in suburbs Bakewell, Bayview, Bellamack, Brinkin, Coolalinga and Driver.
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