If you’re renting because you believe it to be the cheaper option than buying a property, then think again. It turns out there are plenty of places in Australia where it’s actually cheaper to buy instead of renting, based on principal and interest payments on a variable-rate mortgage of 5.9 per cent.
Buying wins out
According to RP Data’s latest Buy vs Rent report, there are 388 suburbs nationwide where you might be better off buying.
That number is a massive increase on just two months ago when there were 238 suburbs where RP Data had calculated it to be cheaper to buy than rent.
National research director at RP Data, Tim Lawless, attributes the big change to lower interest rates and lower capital city dwelling values, which have cut purchase costs.
“If a potential buyer was willing to pay $50 extra to pay off a mortgage in a suburb rather than rent a house or unit, the total number of areas nationally rises from 388 to 1419, based on making interest and principal payments on a variable interest rate loan,” Lawless said in a statement.
In NSW, Enmore is the top metropolitan area where it is cheaper to buy than rent. Based on a median unit property value of $284,410, it is $432 cheaper a month to service a $255,969 mortgage (principal and interest) than to pay the monthly rent of $1950.
In Victoria, Docklands tops the list – it is $1538 a month cheaper to service a $443,867 mortgage on a house in Docklands than pay monthly rental costs of $4171.
The calculations, and the data, should ring alarm bells for habitual renters who rarely give thought to the cost of their living arrangements. In the above Docklands example, it would cost more than $18,000 a year less for a person to service a mortgage than pay rent.
If you don’t know where to start, click here – How to buy your own home
Follow us on Facebook and Twitter
Follow this writer on Twitter: https://twitter.com/#!/Money_PennyP