Is it cheaper to buy or rent?

Buying is cheaper than renting for houses in approximately one in seven suburbs and units in approximately one in five, according to Domain.

Domain found that houses in 13.8% of suburbs around Australia were cheaper to buy than rent in September, after comparing rental prices with property prices and assuming a home loan interest rate of 4.93%.

But conditions varied significantly from location to location:

  • Darwin = cheaper to buy a house in 66.7% of suburbs
  • Perth = 26.2%
  • Adelaide = 8.6%
  • Brisbane = 1.9%
  • Sydney = 0%
  • Melbourne = 0%
  • Hobart = 0%
  • Canberra = 0%

Domain also found that units in 21.0% of suburbs in Australia were cheaper to buy than rent:

  • Darwin = 83.3%
  • Perth = 82.1%
  • Canberra = 39.3%
  • Adelaide = 30.0%
  • Brisbane = 28.3%
  • Melbourne = 1.5%
  • Sydney = 0%
  • Hobart = N/A

Metro v regional

The Domain research revealed some other interesting nuances.

For example, while houses in 13.8% of suburbs were cheaper to buy than rent, this fell to 6.3% in the combined capitals but rose to 27.3% in the combined regions.

Also, while units in 21.0% of suburbs were cheaper to buy than rent, it was 14.5% in the capitals and 44.3% in the regions.

Meanwhile, buyers who get ahead on their mortgage – and therefore reduce their interest bill – have a greater chance of finding a home that’s cheaper to buy than rent.

As previously mentioned, houses in 13.8% of suburbs were cheaper to buy than rent – but this increased to 21.4% for buyers who contributed an extra $50 per week to their mortgage and 29.3% for $100 per week.

For units, that share increased from 21.0% to 32.3% and then 43.6%.

Your mortgage … or someone else’s?

Renting can be a great solution depending on your particular life circumstances. That said, rent money is often described as dead money. 

That’s because while renting might be cheaper than buying in many cases, your monthly rental payment is used to pay off someone else’s mortgage. Conversely, when you buy, each monthly mortgage principal and interest payment adds to your equity and therefore your wealth.

If you’d like to get on the property ladder, I can help. Reach out if you’d like me to model different repayment scenarios and organise a pre-approval for you.

Published: 21/11/2022

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