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. 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. In one in 10 suburbs and towns across the country, repayments are less than $200 a week higher than rent, for the typical property.
In some suburbs, they are actually cheaper. Australia’s median rent prices rose 5.5% over the year to September to reach $713 per week, Cotality data shows. The median property price across houses and units was flat over the year, after six months of steady falls.
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. The analysis assumes a new 30-year loan of 95% of the value, at a 6.2% interest rate.
It does not account for any additional costs. Smaller loans made with bigger deposits would make repayments even more affordable compared with 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.
Repayments were cheaper than rent for the typical property in Carlton, Melbourne CBD, Notting Hill, Travancore and Southbank. 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.
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. Waters, director at Axton Finance, said a stable or growing number were looking to buy direct from their landlord, making the switch without moving. In the Canberra suburbs of Belconnen and Phillip, repayments were less than $75 a week more than rents.
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