The regional areas in Australia where it's cheaper to buy than rent

author-avatar By on July 15, 2021
The regional areas in Australia where it's cheaper to buy than rent

Despite the surge in property prices over the last few months, it's still cheaper to buy than rent in thousands of suburbs according to CoreLogic analysis.

If you needed another reason, besides COVID lockdowns, to leave Sydney and Melbourne here it is. 

Only 4.9% of homes in Sydney and 7.3% of Melbourne homes are cheaper to buy than rent, compared with more than 60% of homes in the combined regions, according to the latest analysis from CoreLogic.

One quarter (26.2%) of homes in the combined capital cities were cheaper to buy than rent.

CoreLogic's Weekly Property Pulse revealed that overall, servicing a mortgage is cheaper than paying rent on 36.2% of Australian properties (3,411 suburbs), which is higher than the pre-COVID proportion of 33.9% reported in February last year.

Related: More than half of homes will be cheaper to buy than rent in next 10 years

But it was homes in regional parts of the country that offered the best bang for buck for buyers.

Most (94.6%) properties in regional NT were cheaper to buy than rent, while more than 86% of homes in Darwin and nearly 80% of properties in regional SA and WA were all cheaper to buy than rent.

Portion of properties cheaper to rent or buy

Greater Capital city or rest of state region

Portion of Cheaper to Buy

Portion of Cheaper to Rent

National

36.3%

63.7%

Combined Capital Cities

26.2%

73.8%

Combined Regionals

60.1%

39.9%

Regional NT

96.4%

3.6%

Darwin

86.5%

13.5%

Regional SA

79.4%

20.6%

Regional WA

79.4%

20.6%

Regional Qld

73.1%

26.9%

Regional Tas

71.4%

28.6%

Perth

59.6%

40.4%

Brisbane

55.3%

44.7%

Hobart

50.2%

49.8%

Regional NSW

48.2%

51.8%

Adelaide

47.4%

52.6%

ACT

43.6%

56.4%

Regional Vic.

43.6%

56.4%

Melbourne

7.3%

92.7%

Sydney

4.9%

95.1%

Source: CoreLogic

CoreLogic's analysis is based on assumptions of an 80% loan-to-value ratio (LVR), an interest rate of 2.4%, and a loan term of 25 years.

CoreLogic head of research Eliza Owen said just because homes in regional areas are generally cheaper to buy than rent doesn't necessarily mean people want to buy there.

"Regional Northern Territory and Outback Western Australia are prime examples. Rental costs tend to be higher in these regions, because accommodation that suits a more transitory lifestyle would likely be in higher demand – for example, in proximity to FIFO mine sites," Ms Owen said.

"The regions where rent payments are more likely to outstrip mortgage repayments generally reflect lower socioeconomic areas within a city, where property is not as expensive, but there is demand pressure on rental markets."

See also: The rise of regional property in COVID

Ms Owen said the results were a reflection of much lower interest costs on mortgage debt since the onset of COVID-19.

"However, reduced interest costs have not led to cheaper mortgage serviceability relative to rents in every instance," Ms Owen said.

"This is especially the case in Sydney, where property values have increased markedly against low interest rates, pushing up loan principals (the amount borrowed) and outpacing growth in rents."

Average new mortgage rates for owner occupiers have fallen from 3.21% in February 2020, to 2.40% as of May 2021, according to Reserve Bank data.  

Since February 2020, property values in Sydney have increased by 15.2% according to CoreLogic. In the same period, Sydney rents increased 2.1%.

"The relatively subdued rental growth may be largely due to a loss of rental demand from stalled overseas migration, where Sydney and Melbourne have traditionally been the most popular destination for international arrivals in the country," Ms Owen said.

Despite property prices increasing, Ms Owen said the low interest rate environment is still conducive to better mortgage serviceability in many parts of the country.

"The analysis is a good reminder for renters to weigh up housing costs and savings, to see if it is time for a change in tenure."

It comes after recent data from SQM Research found that the rental vacancy rate has plunged to yet another low, while Domain research found that rental prices have reached record highs in many capital cities.

Read more: Should you rent or buy?


Photo by Henrique Felix on Unsplash

Latest Articles

author-avatar
Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's passionate about empowering people to make smart financial decisions and improve the financial literacy of Australians by translating complex finance topics into understandable, relatable content.

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree to the Savings Privacy Policy

Loading data please wait...

{{returnData.productName}}

Overview

Current Rate

{{returnData.currentRate | percentage:2}}

Comparison Rate*

{{returnData.comparisonRate | percentage:2}}

Rate Type

{{returnData.rateType}}

Advertised Rate

{{returnData.advertisedInterestRate}}

Comparison Rate*

{{returnData.comparisonRate}}

Monthly Repayment

{{returnData.monthlyRepayment}}

Interest Type

{{returnData.interestType}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Bonus Interest Rate

{{returnData.bonusInterestRate | percentage:2}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Introductory Rate

{{returnData.introductoryRate | percentage:2}}

Introductory Term

{{returnData.introductoryTerm}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Term

{{returnData.term}}

Advertised Interest Rate

{{returnData.advertisedInterestRate | percentage:2}}

Interest Frequency

{{returnData.interestFrequency}}


Fees and Features

Ongoing Annualised Fee

{{returnData.annualFee}}

Upfront Fee

{{returnData.upfrontFee}}

Offset Account

Redraw

Principal & Interest

Interest Only

N/A{{returnData.interestOnly}}

Max loan to value ratio (LVR)

{{returnData.maxLVR | percentage:0}}

Lump sum repayments

N/A

Additional repayments

Maximum Loan Term

{{returnData.maximumLoanTerm}}

Upfront Fee

${{returnData.upfrontFee}}

Ongoing Monthly Fee

{{returnData.ongoingFees}}

Early Repayment Fee Applies

N/A

Vehicle Types

{{returnData.vehicleType}}

Maximum Vehicle Age

{{returnData.maximumVehicleAge}}

Pre Approval Available

N/A

Online Application

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Minimum Deposit

{{returnData.minDeposit | currency : '$' : 0}}

Upfront Fees

{{returnData.upfrontFee | currency : '$' : 0}}

Annual Fees

{{returnData.annualFee | currency : '$' : 0}}

Notice Period to Withdraw

{{returnData.noticePeriodToWithdraw}}

Online Application

N/A

Automatic Rollover

N/A

Maturity Alert

N/A