Low interest rates have made many more suburbs across the East Coast cheaper to buy in than rent, with Brisbane and regional areas of Queensland, NSW and Victoria offering the most choice.  

New data from CoreLogic shows it is cheaper to service a mortgage in both Brisbane and regional Queensland, with 73% of regional Queensland homes and 55% of Brisbane properties cheaper to buy than rent. This is far greater than the national average of 60% regionals and 26% capital cities. 

In NSW, 48% of properties in regional areas and 5% of properties in Sydney are cheaper to buy than rent. In Victoria, 44% of regional properties and 7% of Melbourne homes are cheaper to buy. 

In the ACT, it’s a fairly even split at 44% of homes cheaper to buy and 56% cheaper to rent. 

In Sydney in particular, we hear about lack of affordability a lot and people have every right to complain. The ridiculous amount of stamp duty that buyers have to pay is a massive budget burden and makes saving the 20% deposit that much harder. 

On top of that, government red tape continues to delay supply, with so many onerous rules and responsibilities placed on developers’ shoulders making the processes and timelines for building new suburbs in greenfield areas and higher density living in city areas far too long. 

But let’s put that aside for a minute, as these hurdles aren’t going to change any time soon. 

What’s important for buyers to realise now is that mortgage rates are unlikely to ever be this low again in your lifetime. This is the biggest factor making it cheaper to buy than rent in so many areas.

Here is a list of some desirable East Coast markets where more than 50% of homes are cheaper to buy than rent. Note this data from CoreLogic is based on a 2.4% interest rate and a 25-year loan. 

Where it’s cheaper to buy 

The list below shows the percentage of homes in each area that are cheaper to buy than rent. 

Brisbane 

• Moreton Bay-North 63% 
• Brisbane Inner City 53% 
• Moreton Bay-South 52% 
• Brisbane-East 52% 

Regional Queensland  

• Townsville 95% 
• Mackay-Isaac-Whitsunday 92% 
• Cairns 89% 
• Wide Bay 87% 
• Toowoomba 79% 
• Gold Coast 63% 

Regional NSW 

• Coffs Harbour-Grafton 59% 
• Hunter Valley ex Newcastle 58% 
• Mid-North Coast 57% 
• Capital Region/South Coast 52% 

Regional Victoria 

• North West 87%
• Shepparton 79%
• Warrnambool & South West 64% 
• Hume 53% 
• La Trobe-Gippsland 52% 

Source: CoreLogic, SA4 areas, 80% LVR, mortgage fees excluded, based on estimates of individual homes’ capital value and rental value, data released 15/7/21  

If you’ve never owned a property or perhaps you’ve grown up in this era of very low interest rates, it’s much more difficult for you to appreciate what a big deal today’s record low rates are. To you, it’s normal to borrow at 2%. It’s not normal to the rest of us who have been around a bit longer. 

It was only 10 years ago that home owners were paying an average 7.04% on a typical discounted variable home loan. Over the past 30 years, the average has been about 6.5%, according to historical home loan data published by Finder and historical cash rate movements published by the RBA. 

Apply that 7.04% rate to a $1 million apartment with an $800,000 loan (a typical first home buyer budget in Sydney) and you’d be paying $5,340 per month on a 30-year P & I loan (excluding fees).

Compare that to today. There are plenty of loans at less than 2%, which means the same property would require $2,960 per month in P & I repayments or thereabouts.

That, more than anything else, makes the biggest difference to affordability and presents a great opportunity for those wanting to take advantage of this.

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters. 

For more information including articles, checklists, guides and more visit McGrath’s Insights Centre.

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