Real estate researchers Core Logic have found that more than one-third of Australian real estate is buying cheaper than renting, supported by record low interest rates for eight months.
According to the company’s analysis, mortgage repayments are cheaper than renting 36.3% of Australian real estate, from 33.9% reported in February 2020.
Eliza Owen, Australia’s head of research at CoreLogic, said it reflects a significant drop in mortgage costs since the onset of COVID-19.
“This is one of the factors that may have boosted sales activity resulting from the COVID-19 restrictions in 2020.” Owen said.. “If mortgage payments make more economic sense than rent, lower interest rates may have prompted households paying rent to look for something to buy.”
The data show a clear contrast between states, cities, and regions in the real estate market, as Sydney and Melbourne remain the most difficult markets to enter.
Buying real estate was a better deal for just over 60% of Australia’s rural real estate, but looking at real estate in the capital, this number dropped to 26%.
The Northern Territory region has the highest percentage of cheapest properties (96%), followed by Darwin (87%) and South Australia (79%).
Owen also states that cheaper mortgages alone cannot make the area a more livable place.
“This kind of analysis also shows that historically, just because a mortgage costs less than rent in an area doesn’t mean that people want to buy it there,” she says. I did. “The Northern Territory of the region and Outback Western Australia are typical examples.”
Moreover, low interest rates have not brought about cheap mortgages in all regions. According to Owen, real estate prices in Sydney outpaced rent growth and buyers faced more loans.
This is shown in the analysis, as the percentage of cheap homes to buy in Sydney actually dropped from 7% in February 2020 to 4.9%.
Sydney real estate has increased by 15% since February 2020, but rents have increased by only 2% during the same period that border restrictions banned visitors from entering the country.
As a popular destination for international arrivals, the Sydney and Melbourne rental markets have traditionally relied on demand from international migration to the country.
The data was created using the 80% mortgage assumption (assuming the buyer saved a 20% deposit) and was compared to individual rental property quotes.