More than half of homes will be cheaper to buy than rent over the next decade

September 19, 2023 Catherine Salat

With property prices soaring by 5.8% over the first quarter of 2021, it might come as a surprise to hear that more than half (57%) of houses will be cheaper to buy than rent over the next 10 years, according to the latest REA Insights Buy or Rent report.

What’s more, that figure jumps to almost 75% when you look at units only.

The property group’s analysis was based on modest price growth of 3% each year over the next decade and assumed buyers had saved a 20% deposit. It included one-off and ongoing costs associated with owning or renting property such as stamp duty, fees, and council or strata rates.

Why are buying conditions so favourable? 

The answer can be summed up in just three words: record-low interest rates.

Unbelievably, many mortgage rates can currently be fixed for below 2% a year – meaning it’s never been cheaper to service a home loan, despite booming values. The Reserve Bank of Australia has also repeatedly committed to not raising interest rates until certain conditions are met – which is not expected to happen until 2024 at the earliest.

The report found that if interest rates remain low, moderate price growth will likely offset the additional costs of owning property.

First home buyers may still struggle 

However, the report’s findings do come with a big caveat attached. While many first home buyers can afford loan repayments, it can be a struggle to save a 20% deposit – even in the regions where prices are typically lower than in the capital cities.

Based on 2019 property values, it takes first home buyers in the Blue Mountains around 10.3 years to save for a deposit based on saving 15% of their household income, according to the ANZ-CoreLogic Housing Affordability report.

And prices have risen a lot since then – likely adding many years to those calculations.

That doesn’t mean it’s impossible to get on the ladder, and there are several federal and state government first home buyer schemes that can help.

The cheapest suburbs to buy instead of rent 

Naturally, the report found conditions are most favourable for buyers outside the biggest capital cities.

In Greater Sydney, the top ten list of cheapest suburbs to buy (relative to renting) was dominated by the Central Coast region. However, both Vineyard and Warragamba made an appearance with a $1,063 and $973 monthly price differential respectively.

What about Katoomba?

Based on April’s median sale price and median weekly rent, it’s cheaper to buy a unit (2 bed and above) than rent in Katoomba. However, it is currently cheaper to rent than buy a house.

But, as the old saying goes – rent money is dead money. You’re paying off someone else’s mortgage, not your own. And, if the property rises in value (as many economists have forecast) you don’t benefit, your landlord does.

First home buyer looking to get on the ladder? Just Imagine Finance can help make it happen. Call us on 0414 673 359 or book a call by filling out our online form