The number of homes cheaper to buy than rent has plummeted this year

Record home price increases combined with rising interest rates have made more homes cheaper to rent than buy.

The PropTrack Buy or Rent Report shows it is now cheaper to buy than rent only 27 per cent of homes across Australia.

This number has dropped sharply from just above 50 per cent compared to this time last year.

PropTrack Economist and report author Paul Ryan said while there’s been a clear fall in the affordability of buying a home compared to renting, conditions differ significantly based on property type and location.

“More than a third of units across the country are estimated to be cheaper to buy than rent over the next 10 years,” Mr Ryan said.

“Buying conditions are much more favourable outside of New South Wales and Victoria.

“More than 50 per cent of dwellings are estimated to be cheaper to buy in Queensland, Western Australia, and the Northern Territory. 

“By contrast, in NSW, Victoria and the Australian Capital Territory, less than 10 per cent of dwellings appear cheaper to buy at current prices.”

In NSW, it is cheaper to buy than rent only 9 per cent of properties with price rises across Sydney making renting houses cheaper than buying almost everywhere in the city.

Across Victoria, it is cheaper to buy than rent only 7 per cent of properties, however, pockets in the north, east and west of Melbourne provide affordable options for buyers.

For Queensland, it is cheaper to buy than rent 51 per cent of properties with suburbs to the south and south-west of the CBD providing affordable options for buyers.

While In South Australia, it is cheaper to buy than rent 34 per cent of properties, 41 per cent in Tasmania, 62 per cent in Western Australia and 29 per cent in the ACT.

The balance between buying and renting median-valued homes has changed significantly over the past year with mortgage rates increasing 75 basis points with further hikes expected.

Combined with strong growth in home prices – which are up 14 per cent – renting has become a more affordable option across most of the country now compared to a year ago Mr Ryan said.

“The shift towards more affordable renting costs for median priced homes than buying in late 2021 corresponds with the slowdown in price growth across the country,” he said.

“The balance between the costs of buying and renting provided by this analysis suggests price growth will continue to be slow over the next year, and rent growth will be strong.

“These trends would rebalance the costs of buying and renting towards buying.”

Mr Ryan said he expected favourable conditions for renters to continue to place upward pressure on rents.

“Over the next year, rent price growth will continue to be strong,” he said.

“Across the country, median advertised rents have increased by more than 9 per cent over the past year, with pressure increasingly shifting from regional to capital city areas. 

“With the relative attractiveness of renting in cities like Sydney, Melbourne, and Canberra, this will put continued upward pressure on rents in these locations, particularly as rental demand continues to increase.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.