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The suburbs where tenants have it better than owner-occupiers

By Staff Reporter
28 June 2022 | 10 minute read
sydney suburbs aerial reb

While rents are going up, the monthly cost of a lease is still cheaper than a mortgage in many Australian suburbs.

In some, the large disparity between the average mortgage payment and the average rent is tens of thousands of dollars, according to recent data from PropTrack.

Megan Lieu, an economic analyst at REA Group, explained that the company’s recent Rent or Buy report revealed that the equation of which form of housing makes the most financial sense is rapidly shifting across Australia.

More specifically, it’s becoming increasingly more affordable to rent than buy, according to the latest data.

Not because rents aren’t going up – they are. But rather because in comparing buying versus renting, it’s buyers who are facing the highest mounting challenges to affordability.

“Thirty-one per cent of suburbs in the country with three-bedroom houses are currently cheaper to buy than rent. This is a massive drop from 59 per cent just one year ago,” Ms Lieu explained.

And just over half (53 per cent) of Australian suburbs with two-bedroom units are now estimated to be cheaper to buy than rent, but this is also a large decline from the share a year ago of 84 per cent.

The rising disparity is driven by one main factor, according to Ms Lieu – “the likelihood of higher interest rates”. Though she noted that inflating property prices had also been a contributor.

PropTrack’s economists looked at both the two-bedroom unit market and the housing market for three-bedroom homes in each capital city, finding that the largest gaps between renting and buying tended to fall within suburbs highly prized for their lifestyle and proximity to aspects such as water frontage, the inner city, or desirable commercial districts.

The price differential was calculated based on the assumptions of a 10-year tenure period for buyers, with a mortgage rate of 4.62 per cent, inflation rate of 2.5 per cent, and a rent and housing price increase of 3 per cent.

Sydney suburbs came out on top of both lists, with renters of a three-bedroom house in beachside Watsons Bay saving on average $25,000 by renting in the suburb rather than buying. In Roseville Chase, also boasting water access, renters in two-bedroom units were roughly $10,000 better off renting than buying.

Darwin was the only city to come out firmly in favour of buying in either of the two markets, with the largest price differential being about $200 per month in favour of buyers in Fannie Bay.

Three-bedroom homes: Where it’s cheapest to rent versus buying

Location Monthly price differential between renting and buying Average estimated value of 3-bedroom home
Watsons Bay, NSW $25,117 $6,170,000
Main Ridge, Vic $17,670 $4,070,000
Peppermint Grove, WA $9,720 $2,910,000
Franklin, ACT $7,951 $860,000
Rosny Park, Tas $6,087 $1,870,000
Teneriffe, Qld $5,286 $2,290,000
Leabrook, SA $5,194 $1680,000
Brinkin, NT $2,290 $1,090,000

 

Two-bedroom units: Where it’s cheapest to rent versus buying

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