Investors in prime position in 94% of suburbs as rents outpace buying
With renting cheaper than buying in 94 per cent of suburbs, savvy investors have a prime opportunity to meet strong tenant demand – especially in high-growth regional areas.
A new analysis has compared the cost of servicing a mortgage on a house to renting, revealing that buying a house is more affordable in 6 per cent of suburbs nationwide.
Domain’s analysis, based on suburb-level median house prices, assumed a 20 per cent deposit and a mortgage rate of 5.68 per cent.
Excluding transfer duties, council rates and maintenance, the study then compared the cost of buying a house to the current median house asking rent.
The research has found that across the country, servicing a mortgage on a house is cheaper than paying rent in 6 per cent of suburbs.
However, across the combined capitals, the analysis shows it is cheaper to service a mortgage on a house than rent in only 1.7 per cent of suburbs.
In contrast, the regional suburbs have a better outlook for home ownership, with house mortgages being cheaper than renting in 14 per cent of regional suburbs.
Perth is the most favourable city for house buyers across the capitals, with 4.8 per cent of suburbs where it’s cheaper to buy than rent.
Brisbane followed with 0.4 per cent of suburbs flagged being cheaper to buy a house rather than rent.
As for Sydney, Adelaide and Melbourne, the research has revealed a more dire outlook for prospective home buyers, as it’s cheaper to rent a house than service a mortgage in 100 per cent of suburbs.
While pockets of affordability can be found nationwide, the report shows that many of the suburbs where it is cheaper to buy than rent are located in regional Australia, particularly Western Australia’s Pilbara region.
In Baynton, house rents are found to be almost double the typical weekly mortgage repayment, meaning the region is the most cost-effective suburb to buy nationwide.
Port Hedland followed, with house rents sitting at 1.7 times higher than the weekly mortgage repayment.
Domain stated that the Pilbara region’s housing market reflects that of mining towns, where high wages, a transient population, and a limited rental supply drive up rents.
“These areas experience strong demand from FIFO workers and are heavily influenced by mining sector activity,” Domain said.
“However, they are also known for their volatility, with values subject to the boom-and-bust nature of the resources sector.
“As a result, investors typically demand higher yields to offset the higher risk.”
While interest rate hikes over the past two years have pushed mortgage costs far higher than rents in many areas, the pressure is expected to ease later this year.
The average mortgage rate, currently at 5.68 per cent, has been forecast to fall to about 4.98 per cent by the end of 2025.
The impact on houses will be most felt in regional Australia, with the analysis revealing a larger number of suburbs will become more affordable to buy, compared to the combined capitals.
“Perth stands out as the capital city with the greatest improvement in house-buying affordability,” Domain said.
“In contrast, most other cities experience minimal change, highlighting that interest rates may need to fall further before any significant improvement is observed,” it concluded.