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Is it cheaper to buy or rent your next home in Australia?

The buy vs rent decision is a tough dilemma for many Australians. Caught at the crossroads of either paying a little each week to rent or committing to a long term investment to buy is a weighty decision.

Taking a good look at the financial figures that underlie the rental and owner occupier markets can help shed some light on the process. What you’re sure to find is that buying now is cheaper than renting.

Based on current prices, more than half of the homes in Australia will be cheaper to buy than rent in the next 10 years. Research also found 77 per cent of three-bedroom homes in Western Australia, 85.9 per cent in Queensland and 25.3 per cent in Victoria would be cheaper to buy than rent.

The Australian property market is moving through unprecedented times as it navigates COVID-19. Last year brought recession and lockdowns, but this year has welcomed soaring housing prices and rolling vaccinations.

Most importantly for those in the rent or buy predicament, low interest rates and property price growth are shoring up strong buying conditions now and into the future.

Why buying still makes sense in a boom

The 2021 property market started with a bang. Prices shot up by 2.8 per cent nationally in March - the fastest rate of appreciation since October 1988.

This upswing saw more areas, both urban and regional, reach million dollar median property prices.

In Melbourne there are 184 suburbs with houses and eight suburbs with units that have a current median value of $1 million, which is 34.3 per cent more than one year earlier. And in Perth there are 42 house markets with a current median value of $1 million or higher at May 2021; 61.5 per cent more than in 2020.

But what’s the sense in buying when prices are heading north?

Firstly, there are no signs of a bubble. Price growth is steep, but not sharp enough to raise concerns of a housing bubble.

Australia ranked 15th in a recent analysis of potential housing bubbles across global markets. Thanks to record low interest rates, there is no trigger to cause a fall in housing prices, the report by Bloomberg Economics concluded.

Secondly, property prices are set to continue rising. Economists at major financial institutions are predicting gains of between 15 and 17 per cent this year, followed by upswings of between 5 and 6 per cent in 2022.

Thirdly, interest rates are staying down and this gives buyers reassurance. The Reserve Bank of Australia has flagged keeping interest rates low until at least 2024.

Low rates are part of a winning combination, along with low inflation and low unemployment (which fell 0.2 per cent in the month to April), that is leading Australia’s economic recovery.

In response, banks began offering competitive loan rates with the lowest variable and fixed loan rates at under 2 per cent.

Investors are returning to the market

Savvy investors keeping track of the property market have made their comeback following a five-year hiatus prompted by stricter lending conditions imposed by the Australian Prudential Regulation Authority.

The post-COVID growth in property prices, including gross rental yields, factored with record low interest rates has driven investors back into the fray. It’s a sure sign there are good returns to be made on property.

Despite increasing numbers of investors, statistics show owner occupiers are still the dominant buying force. Housing finance data reveals the volume of finance lent for property purchases to owner occupiers 4.3 per cent in April, compared to finance for investors at 2.1 per cent.

First-home buyers make up a large portion of the owner occupier segment. Statistics from the Real Estate Institute of Australia show there are more first-home buyers purchasing property now than there has been for 10 years. They account for 40.8 per cent of the owner occupied dwelling market.

First-home buyers are also seizing on the financial assistance offered in almost every state and territory of Australia.

Victorian first home owners can receive $20,000 if they buy in a regional area or $10,000 in a metropolitan area and can claim stamp duty exemption or 50 per cent duty reduction when they buy either a new or established property with a value of between $600,000 and $750,000.

First home owners in Queensland can receive $15,000 towards buying or building their new house, unit or townhouse, as long as it’s valued at less than $750,000. There’s also a first home concession for transfer duty on first homes.

And in Western Australia, first home buyers are eligible for a grant of $10,000 who buy or build a new property. The WA Government also offers up to $2000 for the expenses of first-home buyers for homes priced at under $400,000 as part of the Home Buyer Assistance Account. There’s also a stamp duty concession for first-home buyers on any home purchase up to $430,000 with concessions available on homes valued between $430,001 and $530,000.

All first-home buyers could be eligible for the First Home Super Saver Scheme.

More first-home buyers in the market reflects improving housing affordability across Australia, not only for first-home buyers, but downsizers moving out of larger houses and into smaller dwellings, and also upgraders with growing families shifting into larger homes.

Rental market increasingly unaffordable

The economic challenges of COVID-19 saw rent raises postponed by state and territory authorities, but moratoriums on rent increases and evictions have now been lifted across Australia.

It means landlords are free to lift rents to make up for what they lost last year and accordingly, there are worsening conditions for tenants in the rental market.

Real Estate Institute of Australia data shows affordability for homeowners improved with income to loan repayments decreasing 1.1 percentage points to 33.9 per cent.

But it was the opposite for renters with affordability declining over the past year with the proportion of income required to meet rent payments increasing by 0.4 percentage points to 23.7 per cent.

Weekly rental prices for houses have surged across all capital cities - up 14.6 per cent in Perth, 5.2 per cent in Brisbane and 0.9 per cent in Melbourne. Prices for units increased in all capital cities bar Sydney and Melbourne where the loss of international students and migrant workers hit the CBD rental markets hard. Weekly rental prices for units jumped 11.7 per cent for Perth and 1.1 per cent in Brisbane, but dropped by 8.2 per cent in Melbourne.

Property data shows Satterley offers homes in some of Australia’s most affordable areas. These include Botanical Estate, located in Mickleham, north of Melbourne, is ranked third in the cheapest to buy than rent suburbs. Based on the cost of buying and renting the same property, assuming purchasers have a 20 per cent deposit, researchers found a monthly price difference of $239 in favour of buyers. Also north of Melbourne, there’s also savings to be found at Donnybrook, the site of a forthcoming Satterley estate. There, the difference between buying and renting is $283 per month.

Perth’s Lakelands, where Satterley’s Ocean Hill estate is found, has a huge $714 monthly saving for buyers and in Parmelia, home to the Cassia estate, buyers are $636 month better off than renters.

Affordability for buyers is now miles ahead for home buyers in Queensland where the rental market is considerably tight.

Buyers would save an astounding $980 per month over renters at Smithfield Village and at Ripley, home to the Ripley Valley estate, buyers put an extra $627 per month in their pockets. While at Narangba, the location of Satterley’s Ridgeview estate, the monthly saving is $585.

Satterley is Australia’s largest private residential developer and has built masterplanned communities across Western Australia, Queensland and Victoria. For more information on how to take a tour of your nearest display home village, visit

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