Research by Compare the Market has revealed that in certain parts of Victoria, homebuyers could save hundreds of dollars each month by purchasing a property instead of renting. In some areas, monthly mortgage repayments are lower than the cost of renting, with savings of up to $700 a month.
A notable finding from the research is that renters in Melbourne’s CBD face the highest rental costs, with the median monthly rent at $2,882, while monthly mortgage repayments for the area typically amount to $2,193. This gap leaves renters with a staggering $688 difference in favor of owning a home.
Affordable Homeownership Beyond Melbourne’s CBD
Interestingly, the majority of these more affordable homeownership opportunities are not found within Melbourne’s metropolitan area. For potential buyers looking outside the city, places like Morwell, Moe, and Ararat offer a more financially viable alternative for purchasing property compared to renting.
However, when considering units within Greater Melbourne, the situation changes. In 16 suburbs, including popular areas close to the CBD such as Carlton, Travancore, and Flemington, it is cheaper to buy than rent. For example, an apartment in West Melbourne, priced between $470,000 and $505,000, would lead to monthly mortgage repayments of around $2,343. In comparison, renting a similar unit would cost $2,759 per month.
Wider Implications for Homebuyers
The rising interest rates have been a challenge for homebuyers in recent years, but experts are now predicting a potential shift in 2025, with further reductions expected in interest rates. This could make buying a home even more appealing compared to renting, especially as mortgage repayments become more affordable.
Andrew Winter, a property expert at Compare the Market, noted that Victoria’s housing market had lagged behind other states in terms of capital growth. This created an unusual scenario where, in certain pockets of the state, homebuyers are now paying less monthly on mortgages than tenants are for rent. According to Winter, this phenomenon is particularly striking in Melbourne’s CBD, which stands out as an exception across Australia.
Favorable Conditions for Buyers
A number of factors are contributing to this shift. The lack of new housing stock entering the market, combined with high construction costs, has put pressure on rental markets, leaving fewer options for tenants. At the same time, recent data indicates a significant decrease in the number of new units being approved for development. With the Reserve Bank’s recent interest rate cut in February, the housing market is seeing a positive response, with more potential buyers attending open homes.
Winter advises that it may be a good time for those with a deposit saved to consider purchasing a home. “If owning a property is part of your long-term plan, you might find it’s worth paying a bit more to have a slice of Australia to call your own,” he said.
Tenants Face Continued Struggles
Despite these opportunities for prospective homebuyers, renters in Victoria are still facing difficulties. Jennifer Beveridge, CEO of Tenants Victoria, emphasized that many renters dream of owning a home but find the high cost of renting makes it nearly impossible to save for a deposit. While rents have started to stabilize, Beveridge points to structural issues in the rental market, urging the government to focus more on rental affordability in the short term.
For those still renting, Beveridge called for the introduction of a rent fairness formula to prevent rapid increases in rental costs and give tenants the chance to save for a future home purchase.
Where Victorians Could Save by Buying
According to Compare the Market’s findings, a number of Victorian suburbs offer financial advantages for homebuyers compared to renters. Below is a list of suburbs where buyers can save more each month:
Houses:
- Ouyen: Save $440 per month
- Nhill: Save $370 per month
- Stawell: Save $239 per month
- Morwell: Save $223 per month
- Red Cliffs: Save $154 per month
Units:
- Melbourne CBD: Save $688 per month
- Carlton: Save $647 per month
- Notting Hill: Save $515 per month
- Travancore: Save $434 per month
- West Melbourne: Save $416 per month
As interest rates continue to evolve and rental markets stabilize, it seems that more Victorians could find themselves in a position to invest in property and make the leap from renting to owning.
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