Revisiting the rent v buy property conundrum

By Grace Ormsby

November 14 2019
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A growing number of regions are reporting rental prices that are on par with mortgage repayments, reigniting the age-old question of whether Australians are better off renting or buying.

The new housing affordability report from ANZ and CoreLogic has examined the costs of housing as a proportion of average incomes.

Here’s a breakdown of what it found:

Servicing new mortgages

According to the report, repayments on a new mortgage on a regional dwelling currently require 30.6 per cent of gross household income.

For detached houses, this breaks down to 31.4 per cent, while for units, this sits at 27.5 per cent.

It’s down from the peak across both houses and units of 53.1 per cent gross household income, as recorded in March 2008.

The report went on to indicate that the proportion of income required by regional households to service a new mortgage has been held below one-third since June 2013.

Share of income required for rent

“The proportion of income required to pay the rent is roughly equivalent compared with the proportion of income required to service a mortgage across regional Australia,” the report read.

On average, renters are dedicating 30.3 per cent of their salary to accommodation costs, which is only slightly below the 30.6 per cent recorded for mortgage payers.

ANZ and CoreLogic have noted that rental costs have been trending upwards since late 2016, “reflecting an 8.6 per cent rise in rents between the end of 2016 and June 2019, while household incomes were up a lower 5.3 per cent”.

To rent a house, costs as a percentage of income are sitting at 30.6 per cent, while the proportion being spent on servicing a unit rental agreement is now sitting at 29 per cent.

The findings led to CoreLogic’s head of research, Tim Lawless, highlighting an increase in the number of locations where it is cheaper to buy than rent.

Almost 80 regions Australia-wide have been flagged by ANZ and CoreLogic as locations where this is the case.

Such locations include the ACT’s Molonglo, Greater Brisbane’s Ipswich Hinterland and Ipswich Inner, NSW’s Broken Hill, Snowy Mountains and Dubbo, Greater Perth’s Kwinana and Armadale, Greater Hobart’s Brighton, and Darwin city and suburbs.

Mr Lawless said this can be attributed to “the lowest interest rates since the 1950s, together with lower housing prices relative to the market peak.”

nestegg previously reported that housing affordability has now peaked as housing prices rebound.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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