In hundreds of suburbs, the cost to rent a house has increased substantially.
In 518 suburbs of Australia, the monthly payment on a mortgage is less than the average rent. In 2022, interest rates are expected to rise rapidly. The difference could be as much as $927 per month.
Queensland, Western Australia, and the Northern Territory are the markets where the majority of suburbs have this characteristic.
In 95% of suburbs in the Northern Territory, mortgage payments are cheaper than rent. This is true in almost half of the suburbs in Western Australia. This is also the case for around 20% of suburbs on Tasmania and 17% in South Australia.
Mortgage repayments have become cheaper than rent in some suburbs of NSW (6%), Victoria (4%), and ACT (1,4%).
In Suburbs, Buying a home is cheaper than renting.
Adelaide’s north suburbs are more favorable to buyers than renters. For example, Elizabeth Downs has a monthly average mortgage repayment of $412 less.
In the Darwin suburb Zuccoli, comparing the costs of renting to buying, the average mortgage payment is $927 cheaper than the average rent. Darwin City has a similar situation – the mortgage repayments in Darwin are $712 more affordable than the average rent.
The average mortgage in the ACT (Australia), Queensland, Western Australia, and South Australia is lower than that of rent. In specific suburbs like Lyons in Canberra or Spring Hill in inner Brisbane and Travancore, buyers can save $400 per month compared to renters. Berkeley Vale, on the Central Coast, is also cheaper to buy than rent. Regents Park, in south-west Sydney, offers a $155 monthly saving.
Eliza Owen, CoreLogic’s head of research, said that falling prices and increasing rents may attract more aspiring homebuyers to the market.
Rents are not showing signs of slowing down, which would make buying a home more attractive for some buyers.
A fall in the price of a home will make it more affordable, especially for the initial transaction costs. Prices falling, your savings may make up more of the property value. This could allow you to pay a larger deposit or buy more homes.
Owen said that rising rents could encourage some tenants to become homeowners.
Rent increases can be a catalyst for some renters to become homeowners, but they also make it more difficult to accumulate a deposit.
Why Do Rents Look Likely To Increase In The Future?
The number of rental properties in major cities and regions has fallen significantly compared to the level before the pandemic due to disruptions in the supply chain, rising construction costs, and a weakening consumer sentiment. The demand for rental property has increased faster than expected. Some tenants even paid 12 months’ of rent upfront to secure a rental property.
The high demand for rental properties may even increase. The national vacancy rate has already hit a new record of just 1.1%, and the government expects a large net migration from overseas in the coming year. Rents are likely to rise even more due to returning migrants and limited housing.
Factors Impacting Buyers’ Decision To Purchase A Home
Reduced Borrowing Capacity
In the last seven months, increasing interest rates made it harder for Australians to qualify for a mortgage.
Reduced Property Prices
Some first-time buyers have been able to afford homes after the property price dropped. They had previously saved for a deposit. They have been able to enter the market earlier because of the decrease in prices.
It isn’t easy to save a deposit.
In some areas, homebuyers have difficulty saving for a deposit because a large portion of their income is spent on rent.