Regional house prices may be skyrocketing, but a combination of record-high rents and favourable lending terms mean that it’s still cheaper to buy than rent in many locations, according to NAB.
The bank has released a list of regional areas where it’s still cheaper to buy, including Orange and Dubbo in NSW, Warrnambool in Victoria and Launceston in Tasmania.
In Dubbo buying a home is $490 cheaper per month than renting – with the median monthly rent coming in at $1,794, compared to mortgage costs for the same period of $1304.
In Orange, you can save $294 a month by buying. The median rent there clocks in at $2,044 but mortgage payments are $1,750.
In Victoria’s Warrnambool it is $194 cheaper to buy than rent, with a monthly median rental of $1,881 and monthly median mortgage repayment of $1,687.
In Launceston, high rents of $2,157 meant that it was cheaper to service a mortgage, calculated at $2105, but only just, with $52 separating the two.
In calculating where a mortgage beats out renting, the bank assumed a homebuyer would borrow 80 per cent of the property’s price at a rate of 2.69 per cent per annum – meaning homebuyers would need to stump up 20 per cent of the property’s cost upfront.
They used median rental and house price data sourced from CoreLogic to then calculate the difference between the two payments, focusing on major population centres outside of capital cities.
The reason buying won out in many cases was squarely due to near record-low mortgage rates, according to NAB Executive, Home Ownership, Andy Kerr.
“House prices are rising but there’s still plenty of opportunities for Australians to buy their dream home rather than rent it. The simple reason for this is the record low rates on offer, with many mortgage rates still coming with a 2 in front of them,” Mr Kerr said.
A similar study was recently conducted by CoreLogic in July, although that survey assumed a lower 2.4 per cent mortgage rate.
Housing sentiment
The number of Australians who believe that it is a good time to buy a home has fallen in the second quarter of 2021, according to NAB.
Just 29 per cent agreed that now is a good time to buy, down from 40 per cent in Q1.
Sentiment took the biggest dive in Queensland (down 21 points to 23 per cent) and the ACT (down 20 points to 24 per cent).
Those surveyed who said they intend to buy a home in the next 12 months fell to 13 per cent, down from 15 per cent in Q1.