Australia’s long-standing rent-versus-buy divide is beginning to blur - but only in select parts of the market.
Buying a home for roughly the same cost as renting might sound unlikely in Australia’s current housing market, but new analysis shows it is still possible in a handful of apartment markets.
Cotality’s Monthly Housing Chart Pack for March identifies several capital city unit markets where mortgage repayments on a median-priced unit are now similar to, or in some cases less than, the cost of renting.
Cotality head of research Gerard Burg said the result reflects the speed of rental growth compared with more moderate gains in unit values.
“Rents have risen rapidly over the past few years and we’re seeing that growth pick up again, with the national rental index up 5.5% over the past year and vacancy rates around 1.5%,” Burg said.
“At the same time, some apartment markets have seen additional supply come online, which has helped keep a lid on value growth even as rents continued to rise.
"When rents rise faster than property values, the cost gap between renting and buying naturally narrows.”
Inner Melbourne is one of the few markets where mortgage repayments on the median unit are estimated to be around $322 per month lower than the equivalent median rent.
Parts of inner-city Darwin and Canberra’s Woden Valley also show a minimal gap exists between median rents and unit mortgage repayments.
Despite the narrowing gap in some locations, Burg said most markets still favour renting once the broader costs of ownership are considered and detached housing remains significantly more expensive to purchase than rent across all capital city regions.
“Even where mortgage repayments appear similar to rents, buyers still need to factor in additional costs such as deposits, rates, insurance, body corporate fees and maintenance,” Burg said.
“Even after the significant double-digit growth in some of the smaller capital cities in the past few years, the smallest differences were generally seen across Darwin, Hobart and some outer areas of Adelaide and Perth, but renting remains the cheaper option for houses.
“The financial downside to renting is that renters don’t see the wealth benefits most homeowners experience, especially over the past five years where Australian home values have surged almost 44% higher, adding approximately $280,000 to the median dwelling value."
The report also highlights how lower-priced housing recorded substantially stronger value growth than higher-priced properties in the past year, with capital city values across the lower quartile rising 11.5% compared with 6.6% across the upper quartile.
Burg said the affordability constraints were pushing buyers towards more accessible price points.
“The most affordable segment of the market is attracting the largest pool of buyers, particularly when borrowing capacity is stretched and investors are competing with a pickup in first home buyer demand,” Burg explained.
“That competition tends to support stronger value growth at the lower end of the market while higher price brackets are seeing more moderate conditions.”
