Renting vs buying: Canberra suburbs where mortgage repayments are less than rent

Those renting an apartment in the centre of Canberra could be paying more than $100 per week than their owner-occupier counterparts.

New analysis shows the average weekly mortgage repayment on an apartment in the City is $479, compared to a median weekly asking rent of $580.

The City is one of 18 suburbs in Canberra where weekly mortgage repayments for units are less than the median weekly asking rent.

Barton is not far behind the CBD, where mortgage repayments are $99 less per week than rent. In Franklin, Watson and Braddon, those who buy an apartment could save between $80 to $90 per week.

Buyers also save on apartments in town centres, with Greenway, Phillip, Gungahlin and Belconnen all having lower repayments than rent.

The analysis from Domain compared the mortgage repayments on the median-priced house or unit in any suburb against the median weekly asking rent. Only suburbs with more than 50 observations of both sales and leases were considered.

The repayments are calculated with a 3.5 cash rate on a principal-and-interest loan – the typical loan for an owner-occupier. The data assumes the buyer has a 20 per cent deposit and does not take into account rates, stamp duty or owners corporations fees. 

Suburbs where repayments are less than rents

Domain research analyst Eliza Owen said the trend was not concentrated to just Canberra.

“This is something we have seen in a few different cities across Australia where the more affordable areas or areas with lots of unit stock tend to have rent payments that outstrip mortgages,” she said.

“In Canberra, there is a more mobile workforce due to changes in government, more interstate or international students and people visiting as tourism increases.

“These are things that can put pressure on the rental market and might be pushing up rent relative to price growth.”

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Jack Wharton is about to make the move from renting to mortgage repayments. He currently rents a one-bedroom unit in Braddon’s outskirts with his partner and is due to move into Geocon’s Midnight development in the coming months.

He bought the two-bedroom, two-bathroom top floor unit more than two years ago.

“It’s been a long two years, just watching it go up. I had to physically walk past it every day to get to my old work,” Mr Wharton said.

While Domain’s analysis estimates an average Braddon mortgage is $80 less per week than the median rent, Mr Wharton’s repayments will be slightly more but he says this is due to the higher standard of the new apartment.

“We’re going from 56 square metres, we’re very low to the ground and we don’t even have much sunlight to a top floor, two-bedroom [apartment] and we’re adding another 30-odd square metres,” he said.

Mr Wharton has estimated his apartment in Midnight could be rented at $700 to $750 per week, but the minimum weekly repayment on his mortgage is $530.

“I’ve done a bit of research and the rents for a two-bedroom, two-bathroom apartment in Braddon, the cheapest I could find is $550,” he said.

While renters could save on units, there’s no suburb where they will save on houses. The closest is Ngunnawal where the difference between rents and repayments is $1.

The contrast between repayments and rents for houses is particularly stark in inner suburbs. In Yarralumla, mortgage repayments are almost $500 more than rent. In Ainslie and O’Connor the difference is $336 and $338, respectively.

Ms Owen suggested the quality of stock could impact on the variance.

“There could be an element of the housing type that leads to the differences between rent and purchase prices,” she said.

“For example, in central Canberra suburbs, the median purchase price might reflect a nicer property that an owner-occupier might buy whereas the median asking rents might reflect an older or smaller property.”