Mortgage now cheaper than renting on 36.2% of Australian properties

The CoreLogic Quarterly Rental Review for June suggests that paying a mortgage is now cheaper than paying rent on approximately 36% of Australian properties. This is higher than before COVID which was approximately 33%.  

The analysis was undertaken at the individual property level, where mortgage repayments were compared with rental estimates. The data reveals striking differences in housing costs across Australia.

Regional Australia generally has a larger proportion of suburbs where mortgage repayments are cheaper than renting. Regional NT has 96.4%, followed by Darwin with 86.5%. 

The  combined regional areas of Australia suggest that 60.1% of properties are currently cheaper to service a mortgage than rent, while this is true for 25% across capital cities.

RBA data suggests that the average new mortgage rates for owner-occupiers has fallen from 3.21% in February 2020, to 2.40% in May 2021.

The reduced interest costs, however, have not led to cheaper mortgage repayments when compared to paying rent.

This is true for Sydney, where the property values have increased against low-interest rates, pushing up the amount of loan borrowed, while outpacing the increase in rents.

Only 4.9% of properties across Sydney are cheaper to pay mortgage repayments than rent. This rate was 7.1% in February 2020.

History suggests that just because an area has cheaper mortgage repayments than paying rent, it does not mean that people would necessarily want to buy there.  For examples, regional Northern Territory and Outback Western Australia.

The cost of rental in these areas tend to be higher because accommodation are more transitory lifestyle would likely be in higher demand, as with FIFO mine sites.

Areas where rent payments are more likely to be higher than mortgage repayments would reflect a much lower socioeconomic area within a city. Here the property will not be as expensive, but there is high demand on the rental markets.

The low-interest-rates, however, are still make areas conducive to better mortgage repayments in many parts across Australia.

Renters should weigh up the cost of mortgage repayments and the savings offered, to assess if it is time for a change in their housing situation.