The suburbs where mortgage repayments may be cheaper than rent

Jeremy Sheppard from Select Residential Property crunched the numbers to find Australian suburbs where typical mortgage payments may be cheaper than paying rent.

Four official interest rate cuts in the past nine months have brought historically low mortgage payments for property owners, creating a peculiar situation in some suburbs: rent payments could actually be higher than mortgage payments. And these aren’t in far-flung regions, they’re in some of our biggest cities.

We have crunched the numbers to find areas where your mortgage repayments may be cheaper than rent. We have assumed you have enough money for a deposit – calculations have been made assuming a 10% or 20% deposit.

You will also need to have enough money to pay stamp duty and any other upfront costs that come with buying a property. If you have less than 20% deposit that will also include Lenders Mortgage Insurance which varies based on your deposit and loan size. We have assumed you will pay it upfront in the calculations based on a 10% deposit.

It’s also worth noting that owning a home will cost you more than mortgage repayments. Some of the other ongoing expenses you’ll need to budget for include insurance, council rates and repairs and maintenance.

Let’s take a look at each capital city to see what we found.

Brisbane

There’s a fair bit to choose from in Brisbane. Even the housing market has cases where rents are higher than mortgage payments which is not the case in some other cities. And this is even with a 10% deposit.

Notice how cheaper areas dominate the list. House buyers in Logan Central who put down a 10% deposit, can expect to pay their lender $258 per week. But house renters are likely to pay their landlord $331 per week.

It’s more dramatic in the unit market. In the most extreme case of Spring Hill, owners could pay as much as $166 a week less to their lender than a unit renter would pay to their landlord.

Brisbane: Houses        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Logan Central $278,000 $331 $258 $229
Kingston $290,000 $339 $270 $240
Goodna $296,000 $343 $275 $244
Leichhardt $251,000 $301 $234 $208
Crestmead $326,000 $370 $303 $269

 

Brisbane: Units        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Spring Hill $378,000 $479 $352 $313
Beenleigh $205,000 $294 $190 $169
Woodridge $178,000 $257 $165 $147
Fortitude Valley $390,000 $452 $363 $322
Upper Mount Gravatt $387,000 $440 $359 $319

Sydney’s best chances

Sydney has the least number of these special cases. In fact, there are no “housing” markets in Sydney where mortgage payments are lower than rent, even with a 20% deposit, which makes payments each month lower.

The closest case was Whalan in Mount Druitt. Buyers of a typical house in Whalan who put down a 20% deposit will be making principal and interest payments of $380 per week. But renters of houses in Whalan will be paying only $354 per week.

The contest was a lot closer in some Sydney suburbs for units. With a 10% deposit there were a handful of suburbs where mortgage payments were slightly lower than rent payments. There’s not much difference though – Wiley Park unit renters are paying only $3 a week more than unit buyers with a 10% deposit. The difference is more noticeable if home buyers put down a 20% deposit.

Note that this does not mean it’s overall cheaper to own a unit in places like Lakemba than it is to rent one. There are additional costs to home ownership that renters avoid: insurance, council rates and maintenance.

Sydney: Houses        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Whalan $460,000 $354 $428 $380
St Helens Park $546,000 $427 $507 $451
Bradbury $546,000 $426 $507 $451
Jordan Springs $693,000 $562 $644 $573
Rosemeadow $538,000 $414 $500 $445

 

Sydney: Units        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Lakemba $392,000 $378 $365 $324
Granville $457,000 $436 $425 $378
Warwick Farm $366,000 $352 $341 $303
Rosehill $479,000 $454 $445 $396
Wiley Park $388,000 $363 $360 $320

Canberra – Queanbeyan

In order to get a reliable estimate of rent, we require at least 15 properties to be advertised for rent in the last month. Houses for rent are in such short supply in Canberra, that only one suburb qualified.

There were more options in the unit market where oversupply is a bit of an issue at the moment.

Canberra: Houses        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Queanbeyan $510,000 $482 $474 $421

 

Canberra: Units        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
City $505,000 $611 $469 $417
Braddon $430,000 $506 $400 $356
Belconnen $377,000 $446 $350 $311
Turner $472,000 $530 $439 $390
Bruce $382,000 $433 $355 $316

Melbourne’s best chances

Like in Sydney, Melbourne has no suburbs in which the typical rent on a house is higher than mortgage repayments. And that’s even with a 20% deposit.

But the unit market was noticeably different to Sydney. There were plenty of cases where there’s a considerable difference between rent and mortgage payments. The largest was in Carlton where rent is almost $200 per week higher than what a unit owner would expect to pay for an 80% loan-to-value ratio.

Note however, that Carlton has many one-bedroom units catering to students. And many of the unit locations for Melbourne in general have a nasty history of over-supply problems.

Melbourne: Houses        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Hastings $480,000 $393 $446 $397
Meadow Heights $484,000 $393 $450 $400
Wyndham Vale $472,000 $369 $439 $451
Frankston North $437,000 $332 $406 $442
Wallan $491,000 $381 $457 $390

 

Melbourne: Units        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Carlton $382,000 $502 $355 $315
Melbourne $463,000 $576 $431 $383
Travancore $351,000 $425 $326 $290
Southbank $559,000 $607 $520 $462
Docklands $610,000 $618 $567 $504

Adelaide

In Adelaide, it’s the high yield areas which dominate the list and these are in cheaper markets.

There’s not much of a unit market in Adelaide like in other cities. So, the top unit markets were actually in more expensive areas.

Adelaide: Houses        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Andrews Farm $265,000 $309 $246 $219
Munno Para West $281,000 $320 $261 $232
Blakeview $326,000 $357 $303 $269
Morphett Vale $308,000 $335 $286 $254
Parafield Gardens $326,000 $335 $303 $269

 

Adelaide: Units        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Adelaide $411,000 $462 $382 $339
Mawson Lakes $274,000 $330 $254 $226
Prospect $340,000 $328 $316 $281
Glenelg $469,000 $433 $436 $387
North Adelaide $436,000 $382 $406 $360

Perth

Perth has plenty of options and they’re mostly in the cheaper areas where rents are higher as a proportion of property values. There was only one house market with a median value above $300,000 and only just.

Interestingly, in the unit market, the suburb of Perth itself had the highest price range, nearing $400k.

Perth: Houses        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Armadale $211,000 $252 $196 $174
Greenfields $252,000 $287 $234 $208
Mandurah $245,000 $279 $227 $202
Seville Grove $295,000 $320 $274 $244
Warnbro $301,000 $326 $280 $249

 

Perth: Units        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Midland $224,000 $277 $208 $185
Cockburn Central $276,000 $326 $256 $228
Perth $391,000 $424 $363 $323
Osborne Park $259,000 $293 $240 $214
Joondalup $295,000 $322 $274 $244

Darwin

Darwin had few options in the house segment, not so much because of tight rental conditions though, more so due to being a smaller city and having overall patchy data. Data for units was clearer.

Darwin: Houses        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Durack $442,000 $493 $411 $365
Lyons $616,000 $650 $572 $509
Gunn $420,000 $452 $391 $347

 

Darwin: Units        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Darwin $316,000 $435 $294 $261
Parap $253,000 $372 $235 $209
Stuart Park $318,000 $407 $295 $262
Larrakeyah $367,000 $439 $341 $303
Nightcliff $277,000 $329 $258 $229

Hobart

Hobart has the same tight rental market problem as Canberra. Even the unit market has slim pickings.

Hobart: Houses        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Kingston $508,000 $505 $473 $420
Sandy Bay $933,000 $674 $867 $771

 

Hobart: Units        
 Median
value
 Rent per
week
 Loan repayment
per week
10% deposit
 Loan repayment
per week
20% deposit
Battery Point $582,000 $524 $541 $481
Sandy Bay $535,000 $465 $497 $442
Hobart $618,000 $538 $575 $511

 

Notes: Median values and rents as at 29 February, 2020. Repayment calculations have been made assuming an interest rate of 3.54%pa. Ongoing ownership expenses of insurance, council rates and repairs and maintenance were excluded.


About Jeremy Sheppard

Jeremy Sheppard is head of research at Select Residential Property.

 

 

 

 

 

Main image source: oatawa (Shutterstock)

 

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