It’s now cheaper to rent than buy across Australia’s housing market

Despite housing rents surging across Australia over the pandemic:

Australian rental growth boomed over the pandemic.

It has become increasingly cheaper to rent than buy, according to the latest PropTrack Buy or Rent Report:

• It is cheaper to buy than rent around 27% of homes across Australia. This is down sharply from this time a year ago, when this figure was just above 50%.
• However, conditions differ significantly based on property type. More than a third of units across the country are estimated to be cheaper to buy than rent over the next 10 years.
• In NSW, it is cheaper to buy than rent only 9% of properties. Price rises across Sydney have made renting houses cheaper than buying almost everywhere cross the city.
• In Victoria, it is cheaper to buy than rent only 7% of properties. Despite this, pockets in the north, east and west of Melbourne provide affordable options for buyers.
• In Queensland, it is cheaper to buy than rent 51% of properties. In Brisbane, suburbs to the south and south-west of the CBD provide affordable options for buyers.
• In South Australia, it is cheaper to buy than rent 34% of properties, while in Tasmania, it is cheaper to buy than rent 41% of properties.
• In Western Australia, it is cheaper to buy than rent 62% of properties, while in the ACT, it is cheaper to buy than rent 29% of properties.

With interest rates on the rise, the financial scales should continue to shift in favour of renting.

The futures market has forecast an official cash rate (OCR) of 4.3% by May 2023. This would drive the average discount variable mortgage rate to 7.7%, which is more than double its pandemic low of 3.45%:

Australian mortgage rates to double under futures market’s forecast.

In turn, average principal and interest repayments on a typical Australian mortgage would rise by around 50% under the futures market’s OCR forecast.

Based on the above table from PropTrack, Sydney and Melbourne would be hardest hit based on their poorer affordability and their wider gap between the cost of renting and buying.