9 in 10 Australian suburbs now cheaper to rent than buy

CoreLogic has blamed the shift on the record number of rate hikes managing to outpace skyrocketing rents.

Comparing this year’s analysis to the crunching of numbers done at the same time in 2022, it’s a dramatic change. At that time, 30.2 per cent of suburbs were cheaper to buy than rent, compared to the 9.1 per cent figure today.

The shift is just as prominent among unit markets; just 16 per cent of suburbs are now cheaper to buy in than rent, a drop of almost 30 percentage points from 45.2 per cent.

In a concerning trend, houses are cheaper to rent than buy in every suburb across the ACT, Melbourne, and Sydney.

When it comes to units, every suburb across Hobart, Sydney, regional South Australia, and regional Tasmania was also cheaper to rent than buy.

Tim Lawless, the research director at CoreLogic, called out the “stark difference” between findings year-on-year — especially considering the relatively short period of time being compared.

“Despite a double-digit surge in rents nationally, exacerbated by a shortage of rental properties, record levels of net overseas migration and more people returning to major cities for work and studies, the proportion of suburbs where it’s cheaper to rent than buy has increased exponentially in the past year,” he indicated.

All in all, national rents have increased 10.1 per cent over the past 12 months. On average, it costs tenants $225 more per month to remain in a comparative rental.

Over the same period, national dwelling values have dropped -7.9 per cent. While normally this would deem home ownership more affordable, it’s been offset by the 325-bp hike in the cash rate, which has added an extra $774 per month to the average mortgage cost.  

Mr Lawless said: “There is no doubt the cost to service a mortgage compared to rent is keeping people in rental accommodation, adding to the extreme pressure on rental demand at a time when supply levels have not responded.”

Acknowledging that many tenants might see home ownership as a way of breaking out of the rent cycle, he conceded: “It’s just not possible for many because the cost to service a mortgage has become even more onerous in the past year with the increase in repayments outstripping the increase in rents by some margin.”

Homing in on CoreLogic’s findings, only 434 of the 3,904 house and unit suburbs analysed were cheaper to buy either a house or unit than rent the same property type.

So where is it still cheaper to buy than rent?

CoreLogic highlighted that those suburbs where it is cheaper to buy than rent, as of February 2023, are “mostly located in regional areas of Australia with a skew towards mining towns and rural markets.”

In these areas, rents are oftentimes higher relative to the price of housing.

Almost 60 per cent of the cheaper buy suburbs can be found outside a capital city, with Perth dominating the list for suburbs that remain cheap in capital cities.

Mr Lawless and CoreLogic explained that while these suburbs might not appeal to everyone, there are opportunities “if buyers have the ability and desire to get into the market”.

Mr Lawless highlighted that “suburbs where it’s cheaper to buy than rent all have the same thing in common; an affordable median value. Whether it’s units or houses, more than nine out of 10 of these suburbs have a median value under $500,000.”

“These suburbs offer extreme value when compared to suburbs in Sydney, Canberra and Melbourne, where property values might have softened in recent months, but still rate among the most expensive of anywhere in the country,” he commented.  

Even so, he warned investors to be wary of downside risk, especially in mining-intensive areas, flagging that “housing markets in regions with little economic diversity can be extremely volatile in line with fluctuations in the local economic activity.”

The markets where it is cheaper to rent than buy

At the other end of the spectrum, suburbs where it’s far cheaper to rent than buy are skewed towards the premium end of the capital city markets and popular lifestyle markets regionally where housing values tend to be extremely high, CoreLogic reported.

The research group said that the top 10 regions where the difference between paying a mortgage and renting is the most extreme are heavily skewed towards Sydney’s eastern suburbs.

Suburbs at the top of that list tout a median house value of at least $3.2 million.