“Outside of Darwin, regional Australia generally has a higher proportion of suburbs where it is cheaper to pay off a mortgage than it is to pay rent,” said Eliza Owen, research manager at CoreLogic Australia.
“Property values and rents in the combined regional regions of Australia suggest that 60.1% of properties are currently cheaper to service a mortgage than rent, while in capital cities it is. true only for about a quarter of the properties. “
Sydney the hardest
In Sydney, buyers were better off in only 0.7% of all homes in Ryde, 1.1% in Inner West and 1.3% in Northern Beaches.
“Sydney is without a doubt one of the most difficult markets for first-time buyers,” Ms. Owen said.
“However, if the rental market in Sydney strengthens once international footfall picks up, then the mortgage servicing facility may not seem like such a daunting tradeoff if rents go up.”
Melbourne buyers outweigh renters in 5.9% of homes in the west, 4.9% in the eastern interior and 3.9% in the southern interior.
Overall, more than one in three properties (36.2%) across the country are cheaper to buy than to rent, more than the 33.9% recorded in February, before the pandemic hit .
“The increase in the number of areas where it is cheaper to pay off a mortgage than to pay rent across the country, compared to pre-COVID analysis, reflects much lower interest costs on debt mortgage since the onset of COVID-19, ”Ms. Owen said.
The new average mortgage rates for homeowners fell from 3.21% in February 2020 to 2.40% in May 2021, according to RBA data.
“This is one of the factors that may have boosted sales activity resulting from COVID-19 restrictions in 2020; while it makes more financial sense to pay a mortgage than a rent, renter households may have had an incentive to look for something to buy because interest rates have come down, ”said Ms. Owen.
“I would say the momentum could definitely shift back to a more feasible lease over the next 12 months, simply because we are already seeing the potential for increased bank financing costs to spill over into mortgage rates.
“The new average lending rate for homeowner borrowers, where the fixed rate term is three years or more, has already started to increase subtly by about 12 basis points from February to May 2021, which would increase rates. mortgage costs. ”
The analysis was performed at the individual property level, assuming that a deposit was saved, a loan-to-appraisal ratio of 80 percent, an interest rate of 2.4 percent, and a loan term of 25. years, excluding mortgage fees or transaction fees, to calculate mortgage payments.
These were then compared to the rent estimates at the individual property level.