CoreLogic analysis suggests servicing a mortgage is now cheaper than paying rent on 36.2 per cent of Australian properties, which is higher than the pre-COVID proportion of 33.9 per cent reported in February last year.<\/p>\n
CoreLogic head of research for Australia Eliza Owen said the analysis was undertaken at the individual property level, using a set of mortgage assumptions and valuation estimates, to approximate mortgage repayments.<\/p>\n
“These were then compared with rental estimates at the individual property level,” Ms Owen said.<\/p>\n
Using these estimates of mortgage and rent, the data reveals striking differences in housing costs across different parts of Australia.<\/p>\n
Aside from Darwin, regional Australia generally has a larger proportion of suburbs where it’s cheaper to service a mortgage than pay rent.
\nProperty values and rents across the combined regional areas of Australia suggest 60.1 per cent of properties are currently cheaper to service a mortgage than rent, while across the capital cities, this is only true of around one quarter of properties.<\/p>\n
“The increase in areas where it is cheaper to service a mortgage than to pay rent across Australia, when compared with pre-COVID analysis, is a reflection of much lower interest costs on mortgage debt since the onset of COVID-19,” Ms Owen said.<\/p>\n
“Average new mortgage rates for owner occupiers have fallen from 3.21 per cent in February 2020, to 2.4 per cent as of May 2021, according to RBA data.<\/p>\n
“This is one of the factors that may have boosted sales activity coming out of COVID-19 restrictions in 2020; 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.<\/p>\n
“However, reduced interest costs have not led to cheaper mortgage serviceability relative to rents in every instance.<\/p>\n
“This is especially the case in Sydney, where property values have increased markedly against low interest rates, pushing up loan principals (the amount borrowed) and outpacing growth in rents. ”<\/p>\n
Since February 2020, Sydney dwelling values have increased 15.2 per cent while rents only increased 2.1p er cent city wide in the same period.<\/p>\n
The relatively subdued rental growth may be largely due to a loss of rental demand from stalled overseas migration, where Sydney and Melbourne have traditionally been the most popular destination for international arrivals in the country.<\/p>\n
“The regions where rent payments are more likely to outstrip mortgage repayments generally reflect lower socio-economic areas within a city, where property is not as expensive, but there is demand pressure on rental markets,” Ms Owen said.<\/p>\n
“This could be because of affordability constraints on barriers to entry around home ownership (such as a deposit hurdle, professional services or stamp duty payments).<\/p>\n
“However, the low interest rate environment is still conducive to better serviceability in many parts of the country.<\/p>\n
“The analysis is a good reminder for renters to weigh up housing costs and savings, to see if it is time for a change in tenure.”<\/p>\n","protected":false},"excerpt":{"rendered":"
CoreLogic analysis suggests servicing a mortgage is now cheaper than paying rent on 36.2 per cent of Australian properties, which is higher than the pre-COVID proportion of 33.9 per cent reported in February last year. CoreLogic head of research for Australia Eliza Owen said the analysis was undertaken at the individual property level, using a […]<\/p>\n