Is it more cost-effective to purchase or rent your next home You could be pleasantly surprised

white accent bedroom

According to a new analysis, while it may appear that property prices are rising out of reach, the majority of Australian homes are actually cheaper to buy than rent over the next decade.

Based on modest housing price increase of 3% per year over the next decade, the latest REA Insights Buy or Rent 2021 Report finds that it is cheaper to buy than rent roughly 57 percent of residences across Australia.

Now, the outcomes vary by property type and state, which we’ve broken out further below.

However, the analysis revealed that over the next ten years, just over half of houses will be cheaper to buy, while over 75 percent of flats will be cheaper to buy.

So, why is it cheaper to buy than to rent across the country?

The key driver of favorable buying conditions is record-low mortgage interest rates.

“Interest rates can presently be fixed below 2% per year, and the Reserve Bank of Australia has promised to keeping rates low until at least 2024,” says Paul Ryan of Realestate.com.au.

“The assurance that mortgage payments will not rise rapidly provides reassurance to customers who are borrowing higher sums.”

Mr Ryan believes that moderate property price rise (which means possessing an asset that is increasing in value) will likely cover the additional costs of owning a home, such as stamp duty, maintenance, and council or strata rates, given the low interest rates.

Breakdown of states vs. states

The percentage of suburbs where it is cheaper to buy than rent is broken out by state by REA Insight. The houses below have three bedrooms, whereas the apartments have two:

The percentage of suburbs where it is cheaper to buy than rent is broken out by state by REA Insight. The houses below have three bedrooms, whereas the apartments have two:

NSW: 41.3% (of suburbs) for houses, 69.1% (of suburbs) for units

Victoria: 42.2% for houses, 67.6% for units

Queensland: 85.4% for houses, 98.4% for units

South Australia: 73.6% for houses, 98.4% for units

Western Australia: 69.7% for houses, 98.4% for units

Tasmania: 73.2% for houses, 100% for units

Northern Territory: 97.6% for houses, 100% for units

ACT: 65.7% for houses, 100% for units

So here’s where the analysis gets a little tricky.

The REA Insights analysis assumes that purchasers already have a 20% deposit, which remains the biggest barrier for many buyers – notably first-time buyers – as prices climb.

Mr Ryan continues, “Many would-be buyers can already afford loan repayments, but they struggle to save a deposit while renting.”

“Continued price increases may cause more anxiety for many people in this situation.”

How can we assist you in making the decision to buy rather than rent?

As previously stated, saving for a down payment is the most difficult obstacle for many people who want to live in a home they can call their own.

The good news is that there are various choices available to assist you in gaining a foothold on the property ladder more quickly.

The First House Loan Deposit Scheme, for example, allows first-time home purchasers with only a 5% deposit to acquire a home without having to pay lenders mortgage insurance (LMI).

From July, it will accept applications for a further 10,000 homebuyers.

You may also be eligible for a variety of first-time buyer incentives and stamp duty rebates available around the country.

Give us a call now for more information; we’d be happy to discuss your financing choices and assist you in making the transition from renter to purchase.

To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au

Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your situation and may not be relevant to circumstances. Before taking any action, consider your particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.

Contact Us

Schedule your free 15-min call with an advisor

Let us know how we can help below.