RENTERS in regional Queensland could pockets hundreds of dollars in savings by paying a mortgage rather than a landlord.

The Aussie Core Logic Rent v Buy Report found that it was now cheaper to buy than to rent in an estimated 70 per cent of the regional Queensland suburbs analysed for the research.

This was due to a combination of record low interest rates, lower property values, tight rental markets and rising rent costs in many towns and suburbs.

"Rental rates commenced a strong growth cycle across regional Queensland in late 2016 which ran through to mid-2019," Aussie CEO John Symond said.

"Across this time period, regional Queensland house rents rose by 23.5 per cent while house values were up only one per cent.

"Rising rental rates at a time of fairly steady home values saw the gap between renting and paying a mortgage widen, a trend that was later strengthened by mortgage rates starting to fall around mid-2019."

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Acreage for the price of an average capital city house

Budding homebuyers would be best to look into buying now in a number of regions.
Budding homebuyers would be best to look into buying now in a number of regions.

The research compared median rental costs with monthly mortgage repayments on a discounted variable rate and a three year fixed rate, and assumed a loan-to-value ratio of 90 per cent with the buyer having a 10 per cent deposit. It also took the life of the loan to be 30 years.

As a result, the top suburbs where it is now cheaper to buy a house than rent in regional Queensland include the Mount Isa suburbs of Healy, Sunset, Townview and Parkside, and the mining centres of Cloncurry, Moranbah, Collinsville, Blackwater, Longreach and Depot Hill.

For units, the suburbs where it is cheaper to buy than rent are focused on the tourism centres of Cairns and the Gold Coast, with Woree, Manunda, Manoora, Cairns North, Redlynch, Bungalow, Clifton Beach, Parramatta Park, and Ashmore making the list.

Mount Isa. Photographer: Liam Kidston.
Mount Isa. Photographer: Liam Kidston.

On a regional level, the biggest savings can be made in Outback Queensland, where buyers could save up to $1067 a month paying off a home loan (three year fixed rate).

Here, the report said renters were forking out, on average, $1618 a month, compared to just $551 a month for a fixed-rate mortgage.

Mr Symond said mining towns were at the extreme end.

"Regions like Mount Isa and the Bowen Basin mining towns have been attracting steep rises in rental rates, which followed a sharp reduction after the mining boom and in some of these areas mortgage repayments can be more than $1,000 lower each month than renting," he said.

"At the other extreme are the popular coastal markets of southeast Queensland, where rental costs are generally lower than monthly mortgage repayments."

Central Queensland renters could save up to $721 a month by buying a house rather than renting one, while in Mackay, renters could pocket $657 a month by paying back the bank rather than a landlord, the report found.

In Cairns, house buyers could save up to $721 a month, and in Townsville, which is experiencing its tightest rental market on record, renters could pocket $600 a month.

Domestic tourists could look to capitalise on the low interest rates and buy up buy up north. PICTURE: STEWART McLEAN
Domestic tourists could look to capitalise on the low interest rates and buy up buy up north. PICTURE: STEWART McLEAN

On the Gold Coast and Sunshine Coast, the savings are smaller - just $286 and $75 respectively, and only for house mortgages on a three year fixed term.

Notably, it is still cheaper to rent a house than to buy one if your loan is a variable rate one, the report found.

The savings are better for unit mortgages with three year fixed terms - up to $507 on the Gold Coast and $260 on the Sunshine Coast, but a variable rate for a unit mortgage on the Sunshine Coast will still leave you $43 more out of pocket than the median rent.

"Whether the gap widens further depends on the dynamic between rents, housing values and mortgage rates," Mr Symond said.

"The most recent indices data from CoreLogic shows rents across regional Queensland are still rising faster than home values."

All of this points to an attractive market for investors, with gross rental yields across regional Queensland averaging 5.3 per cent, substantially higher than Brisbane's average of 4.4 per cent.

"Regional housing values are generally experiencing a stronger capital gain trajectory than the capital city housing markets which is likely to feature on the radar for investors," Mr Symond said.

Savings are smaller on Gold Coast, but still there for savvy buyers. SUPPLIED.
Savings are smaller on Gold Coast, but still there for savvy buyers. SUPPLIED.

***

REGION BY REGION - Analysis by Aussie CEO John Symond

Aussie Home Loans CEO James Symond, photographed at his offices in Sydney. Britta Campion / The Australian
Aussie Home Loans CEO James Symond, photographed at his offices in Sydney. Britta Campion / The Australian

CAIRNS

Five years ago the typical repayments on a new variable rate mortgage for a Cairns house was about $1682 per month.

By September 2020, despite a 6.6% lift in the median house value across Cairns, the typical monthly mortgage repayment has reduced to $1590.

In other words, it's now about $92 cheaper each month to pay down a new variable rate mortgage on a Cairns house than it was five years ago.

At the same time the cost of renting has increased by about 17% or $287 per month.

The improved repayment position is largely attributable to lower interest rates.

Five years ago the discounted variable mortgage rate was 4.66% compared with 3.65% in September this year.

Considering fixed mortgage rates have reduced more significantly than variable rates, the improved repayment position under a fixed mortgage rate scenario is even better.

Five years ago, when the three year fixed mortgage rate was 4.52%, the repayments on a new Cairns house loan were around $1656 per month.

With fixed mortgage rates averaging 2.35% in September, repayments on a new loan are averaging $1347 per month; almost 19% or $309 per month lower than five years ago.

For units, the Cairns region tops the list for the largest difference between mortgage repayments and monthly rental costs.

Based on the average numbers, suburbs like White Rock, Woree and Manunda all show a saving of more than $700 per month based on repaying a variable rate mortgage on a unit than renting.

At the end of September 2020, CoreLogic estimated that 34 (94%) of the 36 suburbs analysed across the Cairns region were more affordable to pay down a variable rate mortgage on a house compared with rental payments.

Five years ago only 42% of suburbs showed lower mortgage repayments compared with renting.

 

 

***

TOWNSVILLE

Five years ago the typical repayments on a new variable rate mortgage for a Townsville house was about $1,482 per month.

By September 2020, with the median house value 7.2% lower across Townsville and variable mortgage rates dropping from 4.66% to 3.65%, the typical monthly mortgage repayment has reduced to $1220.

In other words, it's now about $262 cheaper each month to pay down a new variable rate mortgage on a Townsville house than it was five years ago.

At the same time the cost of renting has increased by about 8% or $122 per month.

Townsville housing values are once again rising, with the median house value 5% higher over the twelve months ending September 2020.

Considering fixed mortgage rates have reduced more significantly than variable rates, the improved repayment position under a fixed mortgage rate scenario is even better.

Five years ago, when the three year fixed mortgage rate was 4.52%, the repayments on a new Townsville house loan were around $1459 per month.

With fixed mortgage rates averaging 2.35% in September, repayments on a new loan are averaging $1033 per month; almost 30% or $426 per month lower than five years ago.

At the end of September 2020, CoreLogic estimated that 33 (97%) of the 34 suburbs analysed across the Townsville region were more affordable to pay down a variable rate mortgage on a house compared with rental payments.

Five years ago 56% of suburbs showed lower mortgage repayments compared with renting.

Breakwater marina in Townsville. Picture: Evan Morgan
Breakwater marina in Townsville. Picture: Evan Morgan

***

OUTBACK QLD

The broad 'Outback' region of Queensland includes towns as diverse as Charleville, Cloncurry, Longreach and Mount Isa.

Housing market conditions are likely to be diverse from town to town, however the broad average shows an increasing divergence between the costs associated with paying down a mortgage, which are falling, and costs associated with renting, which are rising.

Five years ago the typical repayments on a new variable rate mortgage for an Outback Queensland house was about $916 per month.

By September 2020, with the median house value almost 20% lower across the region and variable mortgage rates dropping from 4.66% to 3.65%, the typical monthly mortgage repayment has reduced to $651.

In other words, it's now about $265 cheaper each month to pay down a new variable rate mortgage on an Outback Queensland house than it was five years ago.

At the same time the cost of renting has increased by about 17% or $233 per month.

Considering fixed mortgage rates have reduced more significantly than variable rates, the improved repayment position under a fixed mortgage rate scenario is even better.

Five years ago, when the three year fixed mortgage rate was 4.52%, the repayments on a new Outback Queensland house loan were around $901 per month.

With fixed mortgage rates averaging 2.35% in September, repayments on a new loan are averaging $551 per month; almost 39% or $351 per month lower than five years ago.

At the end of September 2020, CoreLogic estimated that every one of the 7 towns and suburbs analysed across the Outback Queensland region were more affordable to pay down a variable rate mortgage on a house compared with rental payments.

This low set three bedroom home was on the rental market for $900 a week at the peak of the mining boom.
This low set three bedroom home was on the rental market for $900 a week at the peak of the mining boom.

***

GOLD COAST

Although interest rates have fallen to record low levels, the fact that housing values have been rising faster than unit values across the Gold Coast over the past five years means that it's become slightly more expensive to service a mortgage than it was five years ago.

Five years ago the typical repayments on a new variable rate mortgage for a Gold Coast house was about $2651 per month.

By September 2020, with the median house value almost 18% higher across the region and variable mortgage rates dropping from 4.66% to 3.65%, the typical monthly mortgage repayment has risen to $2773.

In other words, it's now about $123 more each month to pay down a new variable rate mortgage on Gold Coast house than it was five years ago.

At the same time the cost of renting has increased by about 14% or $313 per month.

The Gold Coast unit market has also seen values rising at a faster pace than rents, up 16% and 12.8% respectively over the past five years.

Factoring in lower interest rates though, the cost of servicing a new mortgage on a Gold Coast unit is only 2.9% or $50 per month more relative to five years ago.

Considering fixed mortgage rates have reduced more significantly than variable rates, the improved repayment position under a fixed mortgage rate scenario is even better.

Five years ago, when the three year fixed mortgage rate was 4.52%, the repayments on a new Gold Coast house loan were around $2609 per month.

With fixed mortgage rates averaging 2.35% in September, repayments on a new loan are averaging $2349 per month, 10% or $261 per month lower than five years ago.

The repayments on a new Gold Coast unit loan were around $1709 per month five years ago. With the more substantial drop in fixed mortgage rates, repayments on a new unit loan are averaging $197 per month, or 11.5% lower than five years ago.

***

SUNSHINE COAST

Over the past five years, the median house value and median unit value across the Sunshine Coast have increased by roughly 24% while rents have risen by a more subdued 11.2% for houses and 5.3% for units.

The stronger appreciation in housing values, despite substantially lower mortgage rates, means it's still generally cheaper to be paying rent on the Sunshine Coast than repaying a variable rate mortgage.

The scenario under a three year fixed mortgage rate is more compelling for buyers.

With three year fixed rates averaging 130 basis points less than the discounted variable rate in September, repaying a new mortgage on a Sunshine Coast house is around $75 cheaper per month than paying rent under a fixed rate scenario, and $260 per month cheaper for repayments on a unit.

The typical monthly repayment on a new fixed rate mortgage for a Sunshine Coast house has reduced from $2438 five years ago to $2314, while for units the typical repayments are down from $1766 to $1672.

A couple swimming on the reef next to the pontoon as part of Qualia's Journey to the Heart experience in the Whitsundays.
A couple swimming on the reef next to the pontoon as part of Qualia's Journey to the Heart experience in the Whitsundays.

***

MACKAY/WHITSUNDAYS

The Mackay/Whitsunday's regions, which also includes the Bowen Basin mining towns within the Isaac council, is generally cheaper to be paying down a mortgage than renting.

Typical rental costs for a house across the region were $1832 per month in September compared with mortgage repayment costs of $1388 per month under a discounted variable interest rate scenario.

The savings under a three year fixed mortgage rate scenario are even more substantial due to fixed rate averaging about 130 basis points less than the discounted variable rate.

Under this scenario monthly mortgage repayments on a house in the region are around $1175 or roughly $657 cheaper each month compared with renting.

The scenario for units across the region is even more compelling for buyers, with discounted variable rate mortgage repayments around $319 per month lower than rental payments, increasing to a gap of $431 under a three year fixed rate repayment scenario.

The past five years have been a volatile time for housing values across the region, with the median house value rising by 4.6% between September 2015 and September 2020, while the median value of unit remains almost 18% lower than five years ago.

At the same time rents have generally risen, with the median rent on a house up 23.9% over the same five year time frame, while units rents are 13.2% higher.

 

***

TOOWOOMBA AND SURROUNDS

The difference between paying down a mortgage and paying rent has changed substantially over the past five years.

In 2015 variable rate mortgage repayments on a house were around $162 more per month than rental costs.

By September 2020 the situation had reversed with variable rate mortgage repayments now lower than rental costs by around $47 per month.

The gap between paying a mortgage and renting is even wider for units, averaging a savings of around $129 per month.

Based on data to September 2020, under a discounted variable mortgage rate scenario, monthly repayments on a new mortgage for a house were averaging about $1572 per month compared with rental costs of around $1619 per month.

Under the lower mortgage rate scenario of a three year fixed rate, which was about 130 basis points lower than the discounted variable rate in September, monthly repayments were even lower, averaging $1331 for a new loan on a house and $943 for a unit.

The past five years has seen the median value of a house across the region rise by 8.2% to reach $381,783.

The cost of renting has increased a little more than that, with the median house rent up 9.7% over the past five years.

Despite the rise in housing values across the region, thanks to lower mortgage rates, the cost of monthly variable rate mortgage repayments on a new house loan have fallen by $66 per month over the past five years.

Under a three year fixed rate scenario, mortgage repayments are $281 lower per month than five years ago.

***

WIDE BAY

The costs associated with paying down a mortgage have historically been lower than rental costs across the Wide Bay region over time, however over recent years the gap has actually widened.

Five year ago, the monthly variable rate mortgage repayments on a new Wide Bay house loan averaged $33 less per month compared with the monthly costs of renting.

By September 2020 the difference had increased to $271 per month.

The widening gap is due to two reasons.

The most obvious one is lower interest rates - the discounted variable mortgage rate was 4.66% five years ago compared with the September rate of 3.65%.

Another relates to the dynamic between rental costs and housing values.

The past five years has seen the median house rent rise by 15.3% while the median house value is up a smaller 9.6%

Typical mortgage repayments on a new Wide Bay house loan averaged $1249 per month under a discounted variable rate scenario in September this year, with repayments even lower ($1,057 a month) based on the three year fixed mortgage rate.

Five years ago the monthly repayments on a new variable rate house mortgage were $36 per month more expensive, and $208 per month more under a fixed rate scenario.

The difference is even more significant for unit dwellings where variable rate mortgage payments are about $290 lower per month then renting.

***

NORTHERN NSW

The Richmond-Tweed region, which extends from the Richmond Valley north to Tweed, has recorded strong housing market conditions over the past five years, which have seen housing values rise substantially more than rental rates.

Between September 2015 and September 2020, the median house value across the region is up 43.7% compared with a 28.9% rise in the median rental rate.

Similarly for units, the median value is 34.5% higher over the past five years while rents are up a smaller 24.9%.

Despite the larger rise in housing values, lower interest rates have helped to keep a lid on mortgage repayments, especially for fixed rate borrowers where mortgage rates were about 130 basis point lower than discounted variable rates in September this year.

Based on the average three year fixed mortgage rate, monthly repayments on Northern NSW house are about $237 lower each month compared with the costs of renting, while for unit the cost of monthly mortgage payments are $323 lower each month.

Repayments on a new variable rate house loan were averaging $2658 per month for a house across the region in September, while under a three year fixed mortgage rate scenario, monthly repayments are lower at $2251.

With units offering up a lower price point, mortgage rates are lower, averaging $1953 per month under a discounted variable rate mortgage and $1654 per month under a three year fixed rate scenario.

Originally published as Regions where buying a home is cheaper than renting


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