Lately property prices have been increasing to unbelievable heights, making homeownership seem like a distant dream for many. And while property prices are looking scary at the moment, it may surprise you that a new report has shown that these prices are actually cheaper to buy than to rent over the coming decade.
A Report from REA outlines the financial effects of renting and buying. The report revealed that based on modest housing price growth of 3% per year over the next decade, it will be cheaper to buy property that to rent.
Over Australia, the report did show that just over half of dwelling are cheaper to buy over the next 10 years, while the share of units is almost 75%. Although the results were experienced across the nation, they are dependent on property type and location.
The record-low mortgage interest rates are the main driver of favourable buying conditions over renting.
Realestate.com.au economist, Paul Ryan discusses the rates that have influenced buying conditions, saying, “Interest rates can currently be fixed below 2% per year and the Reserve Bank of Australia has committed to maintaining low-interest rates until at least 2024,”
“This certainty that mortgage costs are not going to increase rapidly provides comfort to buyers borrowing larger amounts.”
Given these low-interest expenses, Mr Ryan says that moderate property price growth is likely to offset the additional costs of owning a property, such as stamp duty, maintenance and council or strata rates.
But what is the difference among the states? REA Insight have created a state-by-state breakdown of the percentage of suburbs where it is cheaper to buy than rent. Houses below have three bedrooms, units have two bedrooms:
NSW: 41.3% (of suburbs) for houses, 69.1% (of suburbs) for units
Victoria: 42.2% for houses, 67.6% for units
Queensland: 85.4% for houses, 98.4% for units
South Australia: 73.6% for houses, 98.4% for units
Western Australia: 69.7% for houses, 98.4% for units
Tasmania: 73.2% for houses, 100% for units
Northern Territory: 97.6% for houses, 100% for units
ACT: 65.7% for houses, 100% for units
When looking at these state statistics, it’s important to note that the REA Insights analysis is based on the assumption that buyers already have access to a 20% deposit, something that is a difficulty for many buyers – especially for first home buyers.
For people who are currently renting, putting enough money aside to save for a home deposit is difficult. “Many would-be buyers can already afford loan repayments, but struggle to save a deposit while renting,” adds Mr Ryan.
Additionally, the recent rise in housing prices does add an extra difficulty to this problem.
But it’s not impossible. The good news is that there are several potential options to help you get a foot on the property ladder quicker.
One option is the First Home Loan Deposit Scheme, which allows eligible first home buyers with only a 5% deposit to purchase a property without paying for lenders mortgage insurance (LMI).
The scheme is set to accept applications for a further 10,000 hopeful homebuyers from July. There are also a range of first home buyer grants and stamp duty concessions around the country that you might be eligible to apply for.
It’s important to look into your options, as there are definitely things that you can do to help achieve the goal of buying property. Contact Loanscope today and we can talk you through the opportunities that will help you stop renting and start buying!