After the surge in property prices over the past few years, it’s now cheaper to buy than rent a house in only 13.8 per cent of suburbs, according to Domain.
Units were slightly more attractive with 21 per cent of locations cheaper to buy than rent, however, in 2021, buying was more affordable in 50 per cent of the country for both units and houses.
“While it might be thought that rising rents and falling house prices would bump up the number of suburbs it is cheaper to buy than rent, it has been overshadowed by rising interest rates and the subsequent escalating costs of holding a mortgage,” Dr Powell said.
“It poses the question, how far will prices have to fall to offset the deterioration in mortgage affordability?”
Across the combined capitals, it is cheaper to pay a mortgage than rent in only 6.3 per cent of suburbs but for units the opportunities more than double at 14.5 per cent.
In Darwin, it is cheaper to make home loan repayments than rent across the vast majority of suburbs.
Perth is the second most favourable city for homeowners where servicing a mortgage is cheaper than renting in roughly a quarter of Perth suburbs for houses and in 82.1 per cent of suburbs for units.
Meanwhile in Sydney and Melbourne, it is cheaper to rent a house or a unit in virtually all locations.
This is also the case for houses in Canberra and Hobart, but Canberra units have a more even split between rent and mortgage repayments.
Dr Powell said regional Australia offers the greatest opportunity for those wanting to own their own home.
“In over a quarter of suburbs, it is cheaper to service a mortgage than pay rent for houses and in 44.3 per cent of the suburbs for units,” she said.
For homebuyers struggling to afford a home, Dr Powell said if you can pay just $50 or $100 extra per week, it will open up a lot more locations that you could potentially buy in most states.
According to Dr Powell, there are some factors that can impact the affordability of particular markets.
“A noticeable trend in regional Australia shows an area may have lower mortgage costs compared to rents but in some cases, it can reflect the local transient nature of the population,” she said.
“We’re also seeing the more premium a suburb, the greater the mortgage repayment became, relative to rent and rent is higher than weekly mortgage repayments in certain suburbs that have greater levels of competition from short-term residents, students and young professionals.”
Dr Powell said the headwinds of rising interest rates have placed a large dent in household budgets and that’s getting ever larger.
“The difference between mortgage repayments and rent has been squeezed as interest rates and property prices have risen over the last year,” she said.
“Although this difference has been tested by rents rising at their fastest pace on record – it has been overshadowed by the escalating costs of holding a mortgage and the higher purchasing price.”
Regional Australia saw the biggest shift annually, with more suburbs now cheaper to rent than buy.
However, Dr Powell said rising rents have been no match for the increased costs of a mortgage and the change in purchasing price over the past year.
“In 2021, roughly 80 per cent of regional suburbs analysed it was cheaper to buy than rent for houses and units,” she said.
“Rising interest rates and booming prices have had a large impact on the weekly mortgage costs – with this proportion plummeting to 27.3 per cent for houses and 44.3 per cent for units.”