Why ‘Just Buy’ Fails Melbourne Renters | Finder Analysis
In Melbourne’s competitive housing market, the common advice for renters to “just buy” is often misleading. A new analysis by Finder reveals that while owning can be cheaper than renting in select areas, this is not the reality for most first-time buyers. The situation is especially complex for those who can only afford a low deposit.
Finder’s Analysis of Melbourne’s Rental and Buying Landscape
Finder’s recent data shows that the number of suburbs where mortgage repayments are lower than rent decreases significantly with smaller deposits. When a buyer’s deposit drops from 20% to 5%, the number of suitable suburbs falls by over half, leaving just 112 units across Australia.
Key Suburbs Where Buying Beats Renting
- Brunswick East
- Prahran
- St Kilda East
These inner-city suburbs often show lower mortgage repayments on typical units than the median rent, making them appear attractive for potential homeowners. However, the reality may tell a different story.
The Deposit Dilemma
The affordability of buying often hinges on the size of the deposit. For the average inner-city unit, priced around $587,400, a 20% deposit requires approximately $117,000. In contrast, a 5% deposit means only around $29,000 is needed.
Monthly loan repayments can vary greatly. For an 80% loan, typical repayments range from $650 to $680, potentially cheaper than renting, which averages between $700 and $800. However, those opting for a 95% loan might face weekly repayments soaring to between $780 and $820, making renting the more affordable option.
Long-Term Considerations
Experts highlight the importance of looking beyond weekly payments. Graham Cooke, Finder’s head of consumer research, notes that while certain pockets may initially appear favorable for buyers, the overall cost of ownership can surpass renting when accounting for additional expenses like stamp duty and other fees.
Damian Medici, director of Margin Finance, cautions buyers to not rely solely on short-term repayment figures. Instead, he suggests focusing on long-term financial goals and the overall feasibility of homeownership.
Market Characteristics and Trends
Many first-time buyers are entering the market with deposits as low as 5%, eager to own despite the risks associated with fluctuating interest rates and personal financial circumstances. Sky Hammer from Convergence Buyers Agents emphasizes that although fewer units may appear cheaper to buy than rent, this advantage is concentrated in specific sectors of the market, particularly aged apartments in smaller complexes over high-rise developments.
Potential Benefits of Homeownership
Despite the upfront costs and logistics of homeownership, experts agree that buyers capable of managing both initial and ongoing expenses generally fare better in the long run. They benefit from capital growth and accumulating equity, especially in an environment where rental prices continue to rise.
