In a couple of months' time, our lease comes up for renewal and my husband and I are understandably nervous about the impending rent increase. Horror stories in the media about crazy rent rises that exceed the usual 5-10 per cent suggest that a larger-than-average increment is a foregone conclusion. 

In the current rental market, I suspect that our anxiety is shared by many renters who aren't in a financial position to buy. But for some lucky buyers in certain pockets of Australia, the dual effect of rising rents and falling house prices are offering an interesting opportunity.

Last year, reports by CoreLogic and PropTrack's Buy or Rent Report showed that "The balance between buying and renting for median-valued homes has changed significantly over the past year."

The drop in property prices is giving some renters the leverage to buy

Although there are some signs of recovery in certain areas of the property market, the recent drop in house prices along with the rise in rental costs is offering some buyers an opening. In certain suburbs,  there's not much difference between mortgage and rental costs, and with a smaller deposit to find, buying a property is suddenly more viable for buyers. If they are flexible and also take advantage of the many different government incentives - such as The First Home Buyer Choice - their stars may actually align.

"Be prepared to try a different tack" was the advice we offered in a post last year when we wrote about navigating change in a choppy property market, and that view hasn't changed. 

For savvy buyers, their stars may be aligning 

In October last year, The Financial Review stated that “Across 518 suburbs around the country, the cost of mortgage repayments on a house is lower than the average rent price, in some cases by as much as $927 a month, despite the rapidly rising interest rates.”

Admittedly, these suburbs are primarily found in a small number of Queensland suburbs, the Northern Territory (95%), and WA (50%), but though the percentage remains lower in NSW and Victoria, there are still hotspots for buyers in each state who are flexible and savvy in their approach. 

Is this YOUR time?

“More than 50% of dwellings are estimated to be cheaper to buy in Queensland, Western Australia, and the Northern Territory. By contrast, in NSW, Victoria and the Australian Capital Territory, less than 10% of dwellings appear cheaper to buy at current prices,” writes Investment Property Mag.

For buyers determined to get on the property ladder before prices climb again, now may be their time. It is important to look at the bigger picture of property investment and the capital growth that homeowners should accumulate over time. Ideally, a property will double in value over a ten-year period and if sales prices in NSW, Queensland and Victoria over the past two decades are an indication - despite global disasters such as the GFC and Covid - property remains a worthwhile investment. 

We've looked at three of our major cities - Melbourne, Sydney, and Brisbane - to see where properties cost less to buy than rent, and below are some of the suburbs highlighted in the CoreLogic and PropTrack reports.

Sydney

In some areas to the southwest and west of Sydney, the differential between buying and renting is minimal - although, it is a different story north and east of the city. There are still opportunities to buy houses in suburbs such as 1. Bateau Bay, 2. Bar Point, and 3. Spencer, but overall, there is a much lower differential when it comes to units and it is important to note that these suburbs are some distance from the city.

Melbourne

For the main part, houses are still cheaper to rent in Melbourne, particularly to the east and south of the city. However, there are some pockets to the north and east where the differential is less marked. In 1. Melton, 2. Melton South, and 3. Bangholme, it is still cheaper to buy a house. But in terms of units, renting is cheaper than buying across Melbourne.

Brisbane

Brisbane has seen massive growth since COVID which makes it cheaper to rent in its inner-city suburbs, but head southeast of the city and there are opportunities to buy. In 1. Lockrose, 2. Riverview, and 3. Laidley, for example, buying is cheaper than renting, and overall, units are more cost-effective to buy in and around Brisbane.

The tax-free capital benefit of owning a property is a huge incentive to buy

There are, of course, other factors to consider when comparing buying to renting. Rates, body corp fees, and maintenance costs are often underestimated by homeowners, and with the rising costs of building materials maintenance costs are likely to spiral.

There are also well-documented drawbacks to renting such as the unknown in relation to rent increases, lack of stock, and the general insecurity of not having a permanent roof over your head.

Furthermore, for some renters, higher-than-average rent increases and the current cost of living will continue to make it difficult to save a deposit (no matter how low prices drop). But for others, these areas may provide the optimum conditions to get into the market.

Have you considered buying off-market?

If you are thinking of buying, have you considered buying off-market? With our Buyer Assist service, you get to work with one of our experienced buyer advocates whose job it is to help our members find the right property, in the right location, for the right price! Book a free consultation with our team to learn more. Alternatively, for a FREE sticky beak at the best off-market properties in Australia, sign up HERE today.