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57 per cent of homes are cheaper to buy than rent: Report

Eliza Bavin
·2-min read
Split image with the exterior of a house on one side and the exterior of an apartment block on the other.
Report finds the majority of houses and apartments are cheaper to buy than to rent (Source: Getty)

More than half of the homes in Australia will be cheaper to buy than rent over the next decade at their current prices, but first home buyers still need to cross the hurdle of saving up for a deposit.

The latest REA Insights report has found that conditions are perfect for homebuyers at the moment, despite the recent surge in property prices.

The report suggests it is cheaper to buy than rent around 57 per cent of homes across Australia based on modest housing price growth of 3 per cent per year over the next decade.

The results differed by property type with just over half of houses being cheaper to buy over the next 10 years, but close to 75 per cent of units will be cheaper to buy than rent.

Cheapest place to buy a home?

In the Northern Territory a whopping 98.5 per cent of three bedroom houses are cheaper to buy than rent. Similarly, 99.9 per cent of two bedroom apartments are cheaper to purchase in the NT.

Unsurprisingly conditions are the most favourable outside of the most populous states but conditions are favourable right around the country, according to the report.

More than 80 per cent of houses, and almost all units outside of Victoria and New South Wales are estimated to be cheaper to buy than rent.

“Affordability is driving demand and as a result it is likely we will continue to see strong regional price growth,” the report said.

In NSW 31.9 per cent of houses and 55.3 per cent of apartments are cheaper to buy than rent and in Victoria the numbers of 25.3 per cent of houses and 62.2 per cent of apartments.

Infographic demonstrating the proportion of properties in Australia that are cheaper to buy than to rent by state.
The majority of homes in Australia are cheaper to buy than to rent (Source: REA Group)

What is driving buying conditions?

The report points to low mortgage interest rates being the main driver for the favourable conditions as interest rates can be fixed below 2 per cent.

This is being further driven by the Reserve Bank which has committed to keeping rates low until 2024.

“This certainty that mortgage costs are not going to increase rapidly provides comfort to buyers borrowing larger amounts,” the report said.

However, the report said the analysis assumes buyers already have access to a 20 per cent deposit, despite sayings for a deposit often being the biggest hurdle.

“Many would-be buyers can already afford loan repayments, but struggle to save a deposit while renting.

“Continued price growth may cause additional concern for many in this position,” the report said.