Can It Be Cheaper to Buy Than Rent?

Can It Be Cheaper to Buy Than Rent?

It’s a question that often takes people by surprise: Can it be cheaper to buy than rent? But perhaps even more surprising is the answer: Yes, it can. In fact, according to a recent study by Domain, it is actually cheaper to buy than rent in more than a third of Australian suburbs.

Domain senior research analyst Dr. Nicola Powell noted that the study was particularly encouraging for first home buyers who are now finding it easier to get into the property market. “It’s also good news for investors who are looking for positively geared property,” said Dr. Powell. “They’ll be receiving more rent than it’s costing them actually to own the property.”

Where is it cheaper to buy than rent?

Based on the latest statistics from CoreLogic, the average price of rent across Australia is $440 per week – slightly more than what you’d expect to pay for a $480,000 home loan with a 30-year term and an interest rate of 2.5%. 

Understandably, buying property remains more affordable in regional areas, but this doesn’t mean that you need to move to the country if you want to pay less for a mortgage than you would for rent.

In fact, the suburb with the biggest ‘rent vs buys price difference was actually in highly sought-after Mollymook Beach near Jervis Bay on the NSW south coast. While it will cost you $1,260 (on average) per week to rent in Mollymook Beach, the median weekly mortgage repayment is $645 – that’s a saving of $615 per week!

A little closer to home, suburbs, where it’s cheaper to buy a house than rent, include Woodridge in Greater Brisbane (where the average mortgage is just $165 per week compared to a median rent price of $300) and the Gold Coast suburb of Molendinar where house buyers can expect to save an average of $75 per week. When it comes to buying vs renting a unit, Mudgeeraba on the Gold Coast is averaging $530 per week for rentals, while median mortgage repayments sit at just $376 per week. 

Are you better off buying or renting? 

Buying and renting both come with pros and cons, so it’s important to sit down and review all the facts before you come to any kind of a firm decision. At this point, it may be helpful to get in touch with a local mortgage broker, who can provide further information about the costs associated with buying a property in your area. 

What are the pros and cons of renting? 

Renting certainly has its perks, as you only need to save for a bond prior to moving in, you aren’t responsible for necessary property repairs and you have the freedom to relocate as often as you like. But you’re also, to a certain extent, at the mercy of your landlord, who can (with appropriate notice) decide against renewing a lease or seek to increase the cost of your rent. Additionally, there’s a reason rent money is often referred to as “dead money” – you’re investing in someone else’s assets rather than building your own. 

What are the pros and cons of buying? 

Many first home buyers are put off by the idea of buying because of the costs associated with owning a home. In addition to saving for a deposit, you’ll also need to factor in purchase costs (such as conveyancer fees and pre-purchase inspections) and the ongoing expense of owning a home (including maintenance, council rates, insurance, etc.). However, when you buy a property, you are investing in a long-term asset.

Not only is your money steadily paying off your mortgage, but the property market in many areas has been steadily increasing. This means that, with time, your equity will likely start to grow and you can potentially use that equity to make improvements or alterations to the house (further increasing its value) or even as a deposit for an investment property. 

Is now a good time to buy a property on the Gold Coast? 

Interest rates are currently at historic lows and lenders are offering attractive deals in an effort to stay competitive. With the property market tipped to increase over the next few years and a great range of government grants still available, it’s easy to see why Australian property experts are saying there has never been a better time to buy. 

To find out if there’s a home loan product that would suit your needs, contact Phil and the team at Professional Lending Solutions today.