Is It Still Actually Cheaper to Rent in Melbourne?

Imagine how much you could do with an extra $100 per week!

If you’re renting to save money, it might be time for a change. Recent data suggests that depending on where you live, servicing a mortgage might be more budget-friendly. According to CoreLogic, home repayments are now cheaper than rent for 36.3% of Australian properties, a figure that is higher than it has been for some time.

So we know what you’re thinking – whereabouts in Melbourne does this apply? And what type of property is this data referring to? Let’s zoom in on the current property trends across Melbourne city first, then we’ll have a look at the broader market across the rest of the state.

The new rental data mentioned above refers specifically to apartments. In fact, if you happen to live in Coburg, Bundoora, or Epping, you could save yourself as much as $115 per week by opting to purchase an apartment rather than renting one.

With the rental market on the back foot in at least 8 suburbs across the city, some folks are re-looking their options and taking the plunge to enter the housing market. For the residents of Carlton, Melbourne CBD, Docklands, Abbotsford, Southbank, Coburg, Bundoora, and Epping (and a handful of others), it’s now cheaper to purchase an apartment and service the mortgage, than it is to rent one!

However, to date, it’s still cheaper to pay rent on a house than it is to service a mortgage on one. Consumer preference for detached living across the city and suburbs remains strong, which means that affordability is being stretched to its limits, with demand outweighing supply. And housing prices are likely to remain high for the foreseeable future.

The rent vs purchasing trend across regional Victoria is also interesting. In a number of regional towns across the state, it’s now cheaper to buy a home than it is to rent one. This is great news for Melbournians who are making a sea change or a tree change.

Property is a long-term investment, so thinking ahead is crucial.  Being on top of your numbers, understanding the pros and cons of both renting and purchasing, and looking at your long-term costs and savings is so important.

So, what’s driving the current real estate market in Victoria, and why the change in consumer preferences, especially in the cities?

Low Interest Rates

With interest rates in Australia at record lows, many people are taking a good look at their budgets and finding that it’s cheaper to pay repayments on a loan than it is to rent a property.

Of course, to be able to establish a loan the buyer must have a certain amount saved for the deposit and the stamp duty. And that’s where the current government incentive rates are coming into play and making it possible for many wage-earners to reach their lifelong dream of purchasing their own home.

Current Government Incentives

The Federal Budget handed down in May 2021, includes several incentives which have given thousands of buyers a leg in the door of the Australian property market.

The First Home Loan Deposit Scheme (FHLDS) is especially aimed at low-middle class earners, allowing eligible buyers to purchase their own home with a deposit as low as 5%.  To qualify for this assistance, properties must be residential and price thresholds apply for both metro and regional Victoria.  Townhouses, apartments, existing homes, and house and land packages all fall under the category of residential property.

The Family Home Guarantee Scheme has been specifically designed to give single custodian parents the security and safety of owning their own home.  Eligible persons are able to purchase a property with a deposit as low as 2%, putting homeownership within reach of many vulnerable families across the state. Of course, there are price thresholds that apply to both regional and metro areas, and property purchased must be residential.

The First Home Super Saver Scheme is another incentive that is allowing thousands of Aussies to secure their place on the property ladder.  Under this scheme, buyers can access up to $50,000 of their superannuation money to put towards as a deposit for their first home.

These incentives have stimulated the housing market across Melbourne and indeed the whole of the state, and for the foreseeable future, the property sector is forecasted to remain strong and buoyant.

Love & Co understand the ins-and-outs of the real estate market in Melbourne’s North. And we’re committed to helping our clients realise their dreams and achieve their housing goals. For more information on the best option for you, call your local Love & Co team today – we’d love to learn about your situation and help you to make an informed decision.

The information in this article is for information purposes only and should not be taken as financial, legal or personal advice. 

While care has been taken to ensure that information contained in this article is true and correct at the time of publishing, any changes after the time of publication may impact on the accuracy of this information.

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