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A Domain data crunch has revealed where in Australia it’s cheaper to buy a property rather than rent and Brisbane has more suburbs to choose from for buyers than the capitals down south.
The data used mortgage repayments based on the median house or unit price for the suburb — assuming an interest rate of 3.5 per cent and a 20 per cent deposit — with costs like council rates and transfer duties excluded.
In Greater Brisbane, the suburbs where it was cheaper to pay for a mortgage than pay rent were generally found outside of the local government area, in Ipswich, Logan and Moreton Bay.
The Logan suburb of Waterford had the biggest gap between buying and renting, with mortgage repayments calculated at $367 a week compared to $400 per week for rent.
It was followed by Bellmere in Moreton Bay North, where paying the mortgage was $31 a week cheaper, and Loganholme and Crestmead, both in Logan, where mortgage repayments were $30 cheaper a week.
While there was a similar pattern for apartments, there were also some inner-city suburbs such as Bowen Hills, Spring Hill and Fortitude Valley where mortgage repayments were cheaper than rents.
The best deal was in Eagleby with a $79 difference, but Bowen Hills in the inner city was not far behind with a mortgage repayment of $339 – compared to $418 for weekly rents, a difference of $78.
At the other end of the scale, New Farm’s weekly mortgage repayment was $1498, a whopping $838 above the weekly median rent of $660.
It was a similar story in Ascot, with median mortgage repayments coming in $641 per week more than it cost to rent, while Auchenflower’s repayments were $558 more than rents.
Domain Research analyst Eliza Owen said Brisbane had far more suburbs, compared to Melbourne and Sydney, where mortgages were cheaper to repay.
“Generally what we saw in houses — which is consistent across capital cities — rents outstrip mortgage repayments in more affordable areas,” she said.
Ms Owen said lower socio-economic areas of Brisbane might be seeing greater pressure on the rental market because of the hurdles associated with buying.
For example, ABS data showed that Waterford had a much higher percentage of rentals that other parts of the city.
“The competition that results in the rental market might be driving up rents over a mortgage repayment,” she said.
When it came to inner-city Brisbane units, Ms Owen said these properties had more competition from mobile workers, short-term residents and young professionals at the rental stage, which could explain why the rental growth was higher than in other parts of the city.
“Then at the same time, Brisbane has had so much supply, and so much scare around oversupply, that purchase prices have been relatively subdued,” Ms Owen added.
“Brisbane units have actually performed pretty poorly over the past few years, compared to the house market.”
At the other end of the scale, prestige areas like New Farm, Ascot and Clayfield would attract a premium from buyers and rental growth in those suburbs would struggle to keep up, she said.
“You’re never going to get the benefits of buying,” Ms Owen noted. “Plus with renting, you can arrange in share arrangements, which makes it even cheaper.”
Ms Owen said while the barriers to entering the Brisbane housing market were challenging, particularly for those on a lower income, the data could help aspiring buyers work out where they’d be placed in terms of managing their mortgage repayments.
“Not everyone is going to be able to afford to buy, but I think what’s helpful about this data set is that it does give perspective on what could be possible for people, if they can overcome the deposit hurdle,” she said.
William Kiln, Mortgage Manager at ING Australia, said housing affordability was an issue around Australia, with putting together the deposit a barrier for many buyers which he said was not going to go away.
“The biggest part of that is not the rental-vs-mortgage,” he said. “It’s the ability to save up for the deposit; that is one of the bigger challenges.
“Where the market is going at moment – interest rates are coming down, and that will help people service their mortgage. The fact is, you still have to save up and have that 20 per cent.”
He said ING was seeing more mortgage applications after the federal election than it had earlier in the year, and people would need to have a strict saving plan to accumulate their deposit.
John Jessop from Elders Shailer Park said buyers moving into the area or upgrading their home were predominately owner-occupiers.
“The $350,000 to $500,000 is a lot of first-home buyers,” he said, adding that they had a broad range of price points in the area they covered, with properties from as little as $150,000 up to well over $1 million.
Mr Jessop had noticed the market had picked up since the federal election. “In the past two to three weeks it’s started to motor again,” he said.
They were also getting buyers from further south, he added, who couldn’t believe the bang for their buck in the area.
When it came to barriers to entering the market, Mr Jessop thought that conditions for business and the labour market were making it harder for young people to buy a home.
“Ten years you basically had a permanent job, nowadays you have people who have two or three jobs,” he said. “The dynamics have changed.”
Meanwhile, in New Farm, demand was coming from young professionals, said Christine Rudolph from Ray White New Farm.
“The attraction of this beautiful suburb is that it sits on a peninsula, with no through access to other suburbs, which makes it unique being so close to the city,” she said.
She said local professional buyers were attracted to art deco apartments and the 1970s brick apartments were popular with renovators, while investors from Sydney were interested by the affordability compared to the Sydney market, as well as low vacancy rates.
Downsizers, too, were keen on buying New Farm apartments, wanting to be close to the water and the lifestyle it brought.
“Aspirational families in their 30s to 40s are key drivers for house sales,” she said, with the suburb well known for its classic Queenslander homes, as well as newer, premium luxury properties.
Meighan Hetherington, director of Property Pursuit Buyers’ Agents, said in property there was often a negative correlation between rent return and capital growth – that is, areas with strong rental returns often had a slower rate of growth over the long term.
“Many of these suburbs are outside the Brisbane local government area and very popular with first-home buyers,” she said, noting that the top 10 best suburbs for mortgage affordability, compared to rentals, all had a median house price under $400,000.
“At the other end of the scale, the 10 suburbs with the greatest gap between mortgage payments and rental returns are those where land values are much higher and the median house price is well over $1 million.
“But even with these higher prices, interstate buyers are seeing great value in inner Brisbane compared to Sydney and Melbourne.”
She said she was seeing family homes within eight kilometres of the CBD in the $750,000 to $900,000 price range being snapped up particularly quickly.
“We are also seeing new listings in this range attracting multiple offers within the first seven days,” she said.