A new report by REA Group has revealed more than half of homes will be cheaper to buy than rent over the next decade, based on current prices.
The REA Insights Buy or Rent Report has analysed the cost to buy and rent in suburbs across Australia to identify which areas represent better value to buy in and the areas where it is cheaper to rent.
The report reveals that more than half of homes will be cheaper to buy than rent over the next 10 years, at current prices.
It notes price growth is likely to remain strong as buyers take advantage of current market conditions, while rent growth will likely remain slow, particularly outside of Sydney and Melbourne.
REA Group Economist and REA Insights Buy or Rent Report author Paul Ryan said the report findings pointed to continued strong housing price growth, particularly outside Sydney and Melbourne.
“Price growth has been strong and is likely to remain strong,” Mr Ryan said.
“Many regions have hit all-time price records so it’s understandable that many people would be surprised to hear that it’s still more affordable to buy in more places than it is to rent.
REA Insights Buy or Rent Report is the latest in a suite of new reports from REA Insights combining proprietary data to deliver market intelligence to support customers and consumers in making the most informed property decisions.
MORE HOMEBUYERS ENTERING THE MARKET
According to the report, low borrowing rates have attracted homebuyers into the market over the past year, with analysis suggesting it is cheaper to buy about 57 per cent of dwellings across Australia.
This figure jumps to 75 per cent when looking at units only.
Buying conditions are particularly favourable outside of New South Wales and Victoria, with more than 80 per cent of houses, and almost all units, estimated to be cheaper to buy than rent.
The Northern Territory was the leading state or territory market where it was estimated it would be cheaper to buy than rent over the next 10 years.
A massive 99.1 per cent of dwellings would be cheaper to purchase than rent over the next decade in the NT.
In Queensland, it would be cheaper to purchase than rent 89.2 per cent of dwellings, followed by Tasmania, on 85 per cent.
In Western Australia, 81 per cent of dwellings would be cheaper to buy than rent over the coming decade, compared to 79.8 per cent of properties in South Australia.
Despite soaring prices in the ACT over the past year, it would still be cheaper to buy than rent dwellings in 78.8 per cent of instances.
Due to falling rental rates in NSW and Victoria, the rates were comparatively low, at 39.3 per cent and 34.7 per cent respectively.
THE CHEAPEST SUBURBS PER STATE
In Greater Sydney, the suburb with the largest price differential to buy a house as opposed to rent, was Tacoma, with an estimated monthly difference of $578.
In Melbourne, it would be $472 cheaper to buy a house at Waterford Park than to rent, whereas in the Greater Brisbane region, it would be $1014 cheaper to buy than rent in Kilcoy.
Buying a house in Adelaide’s Elizabeth South would be $772 cheaper than renting, and in Perth, Hilbert would be $811 cheaper.
At Clarendon Vale in Tasmania, it would be $993 more cost-effective each month to buy than rent, and in Zuccoli in the NT, house-buyers would be $1449 better off monthly.
Coombs would be the most affordable suburb in the ACT region to buy a house, representing a $1001 saving over renting.
The report also found that low interest expenses and moderate property price growth was likely to offset the additional costs of owning, such as stamp duty, maintenance and council or strata rates.
While the analysis assumes buyers already have a 20 per cent deposit, saving for one remains the biggest challenge for many buyers.
Mr Ryan said the research shows that much of the increase in demand that has been witnessed in late 2020 and early 2021 has been driven by exceptionally low borrowing costs.
“The result is that the majority of properties in Australia are cheaper to buy than rent at current prices,” he said.
“Investors are driven by the same comparison between prices and rents, so the finding that so many units, in particular, are cheaper to buy suggests there may be profitable investments currently available.
“On this basis, we expect investor activity in the housing market to increase through 2021.”