High rents and falling property prices have opened a rare window for Australian tenants to become homeowners, with mortgage repayments cheaper than rent in dozens of suburbs.
asserted
repayments → fall → suburbs
Guardian Australia’s analysis of Cotality data shows that median rents in inner-city Melbourne, suburban Canberra and Darwin are now nearly matching weekly home loan repayments.
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rents → show → repayments
Australia’s median rent prices rose 5.5% over the year to September to reach $713 per week, Cotality data shows.
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data → rise → week
The typical rent for a Melbourne apartment was $628 a week after rising 4.8% over the last year.
The typical repayments for a Melbourne flat were $211 more, or $839 a week, based on a median value of $624,740 in September, down nearly $25,000 from a year earlier.
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repayments → rise → September
The analysis assumes a new 30-year loan of 95% of the value, at a 6.2% interest rate.
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analysis → assume → rate
It does not account for any additional costs.
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It → account → costs
Smaller loans made with bigger deposits would make repayments even more affordable compared with rents.
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repayments → make → rents
Owner-occupiers purchasing with a 5% deposit would typically do so through the government’s low deposit scheme, which is designed to help first home buyers.
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which → purchase → buyers
Repayments on new loans had risen overall in the last year for most suburbs, as lower values were offset by interest rates rising 1 percentage point. Where values had fallen more than 10%, though, repayments were likely lower.
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repayments → rise → suburbs
Clint Waters, a Melbourne mortgage broker, said home buying interest had dropped but renters were inquiring in strong numbers as they weighed lower house prices against higher rents.
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they → say → rents
“They’re certainly doing the maths … [and] the equation at the moment is starting to narrow,” Waters said.
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Waters → do → moment
Waters, director at Axton Finance, said a stable or growing number were looking to buy direct from their landlord, making the switch without moving.
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number → say → switch
“Landlords are getting slammed left, right and centre, and going ‘screw this, I’m going to offload,” Waters said.
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Waters → slam → this
“Tenants will ring us up and say, ‘I need to work out if I’ve got the capacity to buy this thing.’
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I → ring → thing
New apartments pushing down prices
In Sydney, repayments were just $100 a week more than rents in inner-city Ultimo and western suburbs Warwick Farm, Rosehill, Liverpool and Granville.
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repayments → push → Ultimo
If only apartments are included, Braddon, Lyons, Gungahlin and Harrison join the list.
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Braddon → include → list
Gerard Burg, Cotality researcher, said areas with significant apartment development tended to be cheaper to buy than rent, especially where flats were being sold direct to owner-occupiers and not rented out.
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flats → say → occupiers
“That just [shows] this influx of supply pushing down the value of the purchase, while comparatively tight rental availability had led to this increase in rents,” Burg said.
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Burg → show → rents
But such areas were “anomalies”, he said.
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he → say → ?
Houses remain generally more expensive to buy than rent.
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Houses → remain → rent
“If it was a sustained thing that you could buy a property more cheaply than renting it, then everyone would buy and everyone would exit the rental market,” Burg said.
uncertain
Burg → buy → market
It was cheaper to buy in a quarter of suburbs in Darwin, where rents have risen 11.6% in the year.
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rents → buy → year
Most areas where buying was cheaper than renting were mining or resource project areas in which fly-in fly-out workers temporarily rent rather than buy, Burg said.
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Burg → buy → which
Burg said mortgage repayments would likely fall if the Reserve Bank held rates steady and values kept falling, as expected by financial markets, potentially narrowing the gap with rents.
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values → say → rents
“[With] rents continuing to increase or … go sideways, that could occur.”
uncertain
that → continue → ?
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