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AU Record number of suburbs cheaper to buy than to rent

Property Here - Friday, July 12, 2013

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THE number of suburbs where it is cheaper to buy a property than pay rent has more than tripled in the past year.

There are now 692 suburbs in Australia where it is more affordable to buy compared with 179 at the same time last year - the combination of low borrowing costs, prices below peaks and high rents.

Queensland comes out on top with 242 suburbs were buying was cheaper, New South Wales was second with 193 suburbs, followed by Western Australia with 78 suburbs.

The figures are based on a model that compares the average rent for the suburb to the costs of servicing a principal and interest loan on a variable mortgage.

The report found even more places where it was cheaper to buy than rent using different borrowing scenarios, with 3230 suburbs in Australia more affordable if servicing an interest only loan on a three-year fixed mortgage rate.

RP Data research analyst Cameron Kusher said the drop in interest rates was the main reason behind the increase in the number of affordable buying suburbs.

"Twelve months ago the average discounted variable mortgage rate was 6.15 per cent compared to 5.4 per cent currently," he said.

"Along with modest increases in rents, the movement in mortgage results has been a boon for the affordability of servicing a mortgage."

RP Data research director Tim Lawless said the analysis found it was typically units which were cheaper to buy than rent.

"The buy-in price tends to be lower compared with weekly rents, providing a narrower gap between mortgage payments and rental payments," he said.

Mr Lawless said the figures revealed that for many, property ownership may be more financially viable option than paying rent every week.

He said capital city home values were now 2.9 per cent lower than when they peaked back in October 2010 and discounted variable mortgage rates were 175 basis points lower from their 2011 peak.

"Many renters and prospective home buyers are likely to be doing their sums to determine whether its better for them to pay a mortgage or pay a landlord," he said.

"In some suburbs it may actually be cheaper than renting especially where we are seeing evidence of tight rental markets resulting in rental increases and lower home values.''

The greater Brisbane area had 71 suburbs where it was cheaper to buy, in Sydney there were 73 suburbs but there were only two suburbs within Melbourne.

South Australia, which is considered one of the most affordable states for property in Australia, had 26 areas in Adelaide where it was cheaper to buy.

Download the full report here.

Number of suburbs cheaper to service a mortgage than rent

Queensland - 242

New South Wales - 193

Western Australia - 78

Tasmania - 54

Victoria - 45

South Australia - 45

Northern Territory - 29

Canberra - 6

(Based on a variable interest rate of 5.35%)

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