It's more affordable to rent four out of five Australian homes despite rapidly rising rental costs
It is still cheaper to rent than buy four out of five homes in Australia despite rapidly climbing rental costs, according to new data from PropTrack.
Its analysis found that at the end of 2022, only 21% of homes in the country were cheaper to buy than rent after interest rates skyrocketed in reaction to climbing inflation, The Australian reported.
Fewer than 7% of homes in New South Wales were cheaper to buy than rent. Darwin is the only capital city where the majority of homes were less expensive to buy.
The nine consecutive interest rate hikes since May have increased repayments on an average $500,000 loan by about $12,000 per year, according to The Australian. That outweighs any benefit to buyers from the 4.51% house price falls from their COVID-boom peaks.
Mortgage repayments are also more expensive than rent, despite rental costs seeing increases of about 20% over the past two years.
PropTrack economist Paul Ryan told The Australian that housing affordability continued to worsen, with the number of homes cheaper to buy than rent shrinking over the second half of 2022.
“Prices are a bit out of line with rental costs, and that’s the kind of thing driving our forecasts,” Ryan said.
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PropTrack predicted that the property market will see price falls of around 10% nationally if the Reserve Bank hikes the cash rate by 50 basis points. If more than one more hike of 0.25% happens, the price drops could be deeper, particularly along the east coast, The Australian reported.
Relative affordability is best in Queensland, where 40.1% of homes are cheaper to buy, and Western Australia (57%). It’s cheaper to buy just 17.9% of homes in South Australia and 22.5% of properties in Tasmania and Canberra.
Ryan said the greater affordability of renting was putting even more pressure on an already strained housing market as fewer people decided to get on the property ladder.
“How do the interest rate increases affect rental markets? One of the ways that happens is it makes buying less attractive,” he said.
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