Where is it more affordable to buy compared with renting? Some practical usage scenarios.

Get the complete and complimentary ‘Buy v Rent’ report and spreadsheet here: http://www.myrp.com.au/buyorrent

This week RP Data released the Buy versus Rent report.  The report turned out to be more popular than we expected – the number of people trying to download the free report and Excel spread sheet overloaded the servers that run the myrpdata.com web site which resulted in a slow load and problems downloading the files.  Sorry to anyone who experienced difficulty.  The load has now eased, so you shouldn’t have any problems accessing the site now and downloading the report and Excel file (http://www.myrp.com.au/buyorrent).

The report compares the costs associated with servicing a mortgage across four different scenarios:

  • Paying off the principal and interest on a variable mortgage rate
  • Paying interest only on a variable rate
  • Paying off the principal and interest on a 3 year fixed rate
  • Paying interest only a three year fixed rate

The loan principal is based on a 90% loan to valuation ratio taken from the median value of a house or unit in the suburbs.  The calculations are based on monthly repayments over a loan period of 30 years and the interest rates used are 6.15% (discounted variable) and 5.9% (3 year fixed).

These costs are compared with the typical cost of renting in the suburb.  It’s important to note, there are additional costs involved with owning a home which are not factored into the analysis (costs of purchase such as stamp duty, legal fees, inspections etc, rates and maintenance are some examples), nor does the analysis factor in any capital growth involved within owning a home.

The headline findings showed there were 238 suburbs nationally where servicing a loan was more affordable that paying the landlord based on the most popular principal and interest scenario with a variable mortgage rate.  Based on an interest only loan with a fixed rate over three years the number of suburbs expanded to 1,759 suburbs nationally.

Anyway… all these findings and detailed tables are available in the report which can be downloaded here for free:  www.rpdata.com/buyorrent

What I wanted to focus on here is the benefit of downloading the spread sheet (also available without cost at the same location as above).  For anyone with rudimentary Excel skills, this freely downloadable spread sheet is a great starting point to get a feel for the costs associated with renting or buying in any suburb around Australia.

For those without those skills, I’ve provided a few tips on what to do below.  The spread sheet can be sorted and filtered to zero in on the suburbs that best your lifestyle or budget.  For those Excel novices you can get some further hints at http://www.exceltip.com/

For the first example, say you wanted to live within 20km of the Brisbane CBD and didn’t want to spend more than $100 per week more than what it costs to rent.  Simply filter the list and voilà – here are the results:

As another example, if you really wanted to live in a house in the Eastern Suburbs of Sydney and were wondering what the costs were with renting any buying, you can search the list like this:

The scenarios you can investigate using this tool are pretty much endless.

In the vast majority of locations it remains more affordable to rent a home than it does to service a mortgage.  Broadly it is the unit markets where mortgage payments tend to be the closest or more affordable than rental payments.  Similarly, at least within the capital cities, it is generally the outer ring suburbs that typically show the most suburbs that are more affordable to buy a home than rent one.

Importantly we would encourage prospective buyers to undertake their own investigations.  Every person’s circumstances are unique and the figures presented above are a guide only.  There are always going to be differences across individual properties.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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5 Responses to Where is it more affordable to buy compared with renting? Some practical usage scenarios.

  1. Rupesh September 5, 2012 at 11:26 am #

    I congratulate you for this comprehensive and very useful report that has the potential of being a driver towards a basic sense of equilibrium in the lopsided market. I was looking at this report from the viewpoint of targetting places to buy an Investmemnt property so the only other detail I am looking forward to is the vacancy rates and mostly the very pricey suburbs are frequented by the owner residents!
    On a slightly different note the distance of Whyalla from Adelaide is approximately 400Km rather than the mentioned 230Km – which may very well and truly be the aerial distance!

  2. Bas October 2, 2012 at 10:30 pm #

    I’m a bit concerned about the accuracy of the data. Not all suburbs list both house and unit and the median price seems way off in some cases (e.g. Bassendean). Would love to know why this is.

    • Tim Lawless October 3, 2012 at 8:01 am #

      Hi Bas, thanks for your question. Statistics arent provided for houses or units where there are fewer than 10 observations in the rental data or valuations data. For example, if a particular suburb showed fewer than 10 rental lisitngs we would not calcualte a rental median or if there were fewer than 10 valid valuations in the suburb we would not incldue the median value statistic. The methodology is clearly outlined in the beginning of the report. The median value we are using for Bassendean is $442,563 for houses and $395,332 for units. With regards to houses, the quality and size of housing across the suburb is certainly diverse – as a rough sanity check, realestate.com.au is showing 30 homes for sale with an asking price under $500,000 and 27 with an asking price over $500,000. The median value was based on 2,818 valuation observations across the suburb and there have been 189 house sales over the past year and 97 rental observations.

  3. James September 28, 2013 at 11:26 am #

    I tried getting the spreadsheet, but the links above only take you to a page where a PDF is emailed…

    How can I go about getting the excel version?

    Thanks
    James

    • Tim Lawless September 30, 2013 at 3:26 pm #

      Hi James, the PDF version is all that is made available.

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