A new report from Aussie and CoreLogic shows that it is cheaper to pay down a mortgage than to pay rent on a comparable property in over half of Australia’s suburbs.
The Buy v Rent Report 2020 makes a region-by-region comparison of the costs of servicing a mortgage versus rental price, based on median house and unit values, compared with median asking rents.
The report finds a “persistent reduction in the cost of mortgage repayments due to record low mortgage rates, along with a subtle reduction in house values through the COVID-19 period”.
The analysis factored in two interest rate scenarios for mortgage repayments, “utilising principal and interest payments over a 30-year loan term based on either the discounted variable mortgage rate or the three year fixed rates as reported by the Reserve Bank of Australia”.
The report found:
- Under the discounted variable mortgage rate for houses, 32.9 per cent of Australian suburbs recorded lower monthly mortgage repayments than rental payments, up from 25.1 per cent a year ago and only 0.5 per cent 10 years ago.
- Under the discounted variable mortgage rate for units, 37.7 per cent of Australian suburbs were more affordable to pay down a mortgage than rent, up from 31.8 per cent a year ago and 0.7 per cent 10 years ago.
- Under the three-year fixed rate scenario for houses, just over half (52.2 per cent) of Australian suburbs were cheaper to pay down a mortgage than pay rent on a house, up from 39.9 per cent a year ago and 0.4 per cent of suburbs 10 years ago.
Under the three-year fixed rate scenario for units, 59.1 per cent of Australian suburbs recorded a lower cost for servicing a mortgage than renting, up from 45.6 per cent a year ago and 0.1 per cent 10 years ago.
“While the duration and impact of the pandemic that has dominated 2020 is still unclear, Australia is relatively well positioned,” Aussie CEO James Symonds explains.
“We are starting from a position of fiscal and economic strength, and significant stimulus measures will continue to support the economy. Even in this current environment, Australians’ appetite for residential property is strong.
“The property market has shown positive indications of this; September for example marked a turning point in market sentiment, when consumer confidence rose, new listings forged ahead, and home values nationally made annual gains of 4.8 per cent.
“Amid this backdrop, new home loan approvals jumped 12.6 per cent in August, and some experts are speculating house prices are likely to hit a new high in 2021, with values potentially rising 15 per cent by 2023.
“Despite the uncertainty of the pandemic, one thing is for sure: home loan interest rates are the lowest in Australia’s history.”