Falling interest rates and growing rental prices impacted NSW prices

Servicing a mortgage can cost less than renting in many regional towns. Here’s a look at some of the cheaper regions for homes:

It’s cheaper to buy a home than rent one in much of regional NSW, despite a recent explosion in property prices.

New analysis has revealed record-low interest rates have mitigated the impact of higher prices in many areas, while increased demand from tenants has driven up rental prices over the past year.

It’s meant that servicing a mortgage on a typical property in many prominent regional towns will cost less than the median rental price in the area, according to the ANZ-CoreLogic Housing Affordability report.

Regions where paying down a home was cheaper than renting included Albury, Wagga Wagga, Dubbo, Tamworth and Queanbeyan, on the outskirts of the ACT.

Homeowners got particularly big savings compared to renters in the Lower Murray region. Paying rent on a home in the area would require 24.1 per cent of the typical income, but paying down a home would eat up 16.9 per cent of income.

There was a similar gap between rents and ownership costs in the Moree-Narrabri region in northwestern NSW.

ANZ senior economist Felicity Emmett said the lack of affordable rental properties in major cities was driving more tenants to regional areas and rents have risen.

“As a result of the migration out of the city, regional NSW has become one of the most expensive areas for rent across the board,” Ms Emmett said.

“For some, this move will be permanent as they find life in the bush more attractive than the city. For others, it is a temporary move that they embarked on during the pandemic.”

Richmond Valley was the most expensive region for renters, requiring 39.1 per cent of their income. It is closely followed by the Snowy Mountains, with 36.7 per cent of income required to pay rent.

The ANZ report also revealed that the upfront costs of home ownership remained one of the biggest hurdles for new buyers.

On average, it now takes the typical household a record 10.2 years to save a 20 per cent deposit, up from eight years in 2020.

“While the portion of income required to service rents has remained relatively manageable at the national level, there are pockets of regional Australia and lifestyle markets where the difficulty of saving for a deposit is being further hampered by a sharp rise in rents,” the report stated.

“Unlike (upfront costs) mortgage serviceability has not blown out to record highs through the current upswing … due to the very low mortgage rate environment,” the report said.

In regional areas, rent values saw a strong rise of 11.5 per cent against an increase of 4.2 per cent in combined capital city rents over the same period.

“The only reprieve for renters in the current environment is that, as with the rate of growth in purchasing values, the rate of increase in rents is losing some momentum,” the report concludes.

“Rental pressures are estimated to be highest across the Richmond Valley – Coastal region, where housing trends amid COVID-19 had seen a surge in demand for lifestyle properties.”

At the national level, mortgage serviceability and rent were kept relatively contained due to low interest rates.

Ms Emmett said a return to office work could drive a shift in regional areas. “This question mark over work-from-home culture could drive a slower pace of growth in house prices,” she said.
“Whilst there will be a modest correction due to the new APRA policy changes, we might not see higher supply and affordability of houses until 2023.”

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Originally published as Rent vs Buy: Data reveals regions where buying is cheaper than rent

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