It's cheaper to pay off a mortgage than it
is to rent in many Australian locations. While the long-term benefits of home
ownership are obvious, the short-term savings associated with renting do not
always come off. According to figures from CoreLogic, the majority of homes in
Queensland are now cheaper to buy than rent, as are some cities and most
regional parts of Australia. While Sydney, Melbourne, and combined capital
figures point towards cheaper renting, these figures may even out in coming
months as more people move away from state capitals.
According to the latest CoreLogic figures,
over 55% of Brisbane homes and 73% of regional Queensland homes were cheaper to
buy than rent. These numbers were even higher in other parts of the country,
with regional Northern Territory leading the way at 96.4% and Darwin not far
behind at 86.5%. Regional South Australia also had a high proportion of
properties where mortgages were cheaper than rents at 79.4%. While it was still
cheaper to rent in regional NSW and regional Victoria at 48.2% and 43.6%
respectively, the combined national regional figure was 60.1%.
It is still much cheaper to rent than buy
in Australia's biggest cities, however, with the combined national capital
figure also low at 26.2%. Sydney is the least affordable place to buy property
in Australia compared to renting at just 4.9%, followed by Melbourne at 7.3%.
While Australia's two largest cities will be the hardest to shift, low interest
rates and population movement towards the regions will have an effect over
coming months. In recent quarters, both Sydney and Melbourne experienced a
downward shift in internal migration.
According to CoreLogic Research Director
Tim Lawless, while smaller state capitals and many regions were cheaper to buy
“compared with New South Wales and Victoria, Queensland is looking very
affordable. Over the past ten years, Brisbane housing values have increased at
a much lower rate than Sydney or Melbourne. Brisbane values are up 33% since
June 2011 compared with a 90% rise in Sydney housing values and a 58% lift in
Melbourne housing values.”
The changing relationship between buying
and renting will further influence market sentiment according to Mr. Lawless,
with “the analysis a good reminder for renters to weigh up housing costs and
savings, to see if it is time for a change in tenure... If it makes more
financial sense to pay for a mortgage than rent, renting households may have
been triggered to look for something to buy as interest rates have fallen...
The average mortgage rate for owner occupiers taking out a new principal and
interest loan in May was just 2.3 per cent; the lowest cost of debt on record.”
As more and more Aussies leave the cities and head for the hills, this trend
might start to expand into more populated parts of the country.