Rent versus buy remains a moving target for Melbourne households, with new Finder data showing only select unit markets are cheaper to own than rent and mostly for buyers with larger deposits.
Renters across Melbourne are being told to “just buy”, but new data shows that even when a mortgage looks cheaper than rent on paper, the reality for first-home buyers is far murkier.
Finder analysis shows there are pockets of inner Melbourne where weekly mortgage repayments on a typical unit are lower than the median rent, a finding that will sting for renters watching their payments climb year after year.
But the apparent win disappears fast once buyers enter the market the way most first-home buyers do, with a low deposit and a larger loan.
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Finder found the number of suburbs where it is cheaper to pay off a mortgage than rent more than halves when the deposit falls from 20 per cent to 5 per cent, shrinking the list to just 112 unit markets nationally.
In Melbourne, the ‘cheaper to own’ pockets are largely confined to inner-city unit markets, with Finder identifying suburbs such as Brunswick East, Prahran and St Kilda East where mortgage repayments on a typical unit can undercut rent on paper.
Finder head of consumer research Graham Cooke said rent versus buy remains a moving target for Melbourne households.
Finder head of consumer research Graham Cooke said it was tempting to look at the “cheaper to own” suburbs and assume the property ladder was suddenly within reach, but for most Australians renting remained the cheaper option once the full picture was considered.
“Even in the rare pockets where the maths is flipped, the calculations don’t account for the deposit you’re required to save, stamp duty, and all the other fees that go into buying a home,” Mr Cooke said.
Melbourne’s housing market remains highly competitive for first-home buyers, particularly in inner suburbs where demand for units continues to outstrip supply. Picture: Nicki Connolly
The impact of a smaller deposit is stark in Melbourne’s inner-unit market, where the gap between renting and owning can quickly flip once buyers borrow more.
Baseline Financial director and property investment expert Ari Levinson said the average inner-city Melbourne unit was priced at about $587,400, meaning a 20 per cent deposit required roughly $117,000, compared with about $29,000 at a 5 per cent deposit.
“At current interest rates, an 80 per cent loan on an average inner-city unit can result in weekly repayments of around $650 to $680, which can bve cheaper than renting at $700 to $800 a week,” Mr Levinson said.
A comparison of weekly rent versus mortgage repayments highlights how the advantage of buying can disappear quickly when buyers rely on low-deposit loans. Picture: Google Gemini
“But a 95 per cent loan pushes repayments closer to $780 to $820 a week, making owning more expensive than renting.”
Mr Levinson said the deposit hurdle, not income, remained the biggest barrier for many would-be buyers, with low-deposit schemes helping some enter the market sooner, but often at the cost of higher repayments and tighter household cash flow.
Damian Medici warns buyers not to rely on weekly repayments alone when deciding whether to rent or buy, urging borrowers to focus on long-term goals and cash flow.
Margin Finance director Damian Medici warned that focusing on weekly repayments alone could be misleading, saying buyers should be cautious about treating “cheaper than rent” as a strategy in itself.
“While it can be cheaper to buy in some cases, that doesn’t automatically mean it’s a good asset to buy,” Mr Medici said.
“I wouldn’t use repayments alone as a strategy. It always comes back to the client’s goals.”
Mr Medici said many first-home buyers were now entering the market with deposits as low as 5 per cent, allowing them to buy sooner, but leaving them more exposed to interest-rate rises and changes in personal circumstances.
“Getting in earlier is the priority for a lot of people,” he said.
“But buyers need to understand the trade-offs and make sure the property they’re buying actually aligns with their long-term plan.”
Sky Hammer says not all apartments are equal, with smaller blocks and older-style units offering stronger long-term fundamentals than high-rise towers.
Convergence Buyers Agents director agent Sky Hammer said the “cheaper to own” equation was largely confined to specific parts of the unit market, particularly older-style apartments in small blocks, rather than high-rise developments.
“There are definitely situations where buyers can purchase a unit and it costs them less to hold than renting,” Mr Hammer said.
“But it really depends on where they’re buying.”
Mr Hammer said cheaper apartments in Melbourne’s CBD and Docklands could stack up on paper, but many buyers were instead prioritising lifestyle suburbs such as Prahran, St Kilda East and Caulfield North, where long-term fundamentals mattered more than headline repayment comparisons.
A table showing Melbourne suburbs where units are cheaper to own than rent under a 20 per cent deposit scenario, based on Finder analysis. Picture: Google Gemini
“While the weekly repayment numbers might look good on a spreadsheet, the long-term fundamentals are far more important,” Mr Hammer said.
Despite the hurdles, experts said buyers who could manage the upfront costs and ongoing repayments were still generally better off over the long term, benefiting from capital growth and equity rather than rising rents.
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