Buying now cheaper than renting in City of Melbourne: ANZ report
Melbourne’s popular inner suburbs are now cheaper to buy into than rent in, a new report has revealed.
Homeowners in the City of Melbourne would spend less of their income on mortgage repayments than they would renting there, analysis by ANZ and property data firm CoreLogic shows.
The municipality includes Carlton, East Melbourne, Kensington, the CBD, North Melbourne, Parkville, Southbank and West Melbourne.
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The research found paying off a mortgage on a median priced house or unit in the area ($540,000) eats up 39 per cent of the median weekly household income ($1342).
The proportion to cover the median asking weekly rent of $566 is 41.8 per cent.
ANZ senior economist Felicity Emmett said the “extraordinary situation” was not found in any other Victorian council area.
“It’s a tight rental market with a very low vacancy rate, and that flows through to the asking prices there,” Ms Emmett said.
“Meanwhile, Melbourne house prices have been falling for quite some time and it’s really helped to make it more affordable to buy a new home.”
She said the Reserve Bank’s latest interest rate cut to a historic low would further help buyers looking to break in.
Hocking Stuart Melbourne and Carlton director Scott McElroy said demand for the area’s rentals remained strong and weekly asking prices hadn’t eased during the property downturn.
“If you’re renting an apartment that costs $600,000 to buy, you’re probably going to be paying a minimum of $600 a week for it,” Mr McElroy said.
“It wouldn’t surprise me if some people pay more in rent in the area, but it obviously depends on the value of the property and how much you’re borrowing.”
He said the suburbs were dominated by small apartments and off-the-plan developments.
CoreLogic data shows 2358 units and 368 houses sold in the City of Melbourne in the year to February.
Renter Sasha Soibelman, who lives in the inner city with housemates Steven Greenstein and Emily Trewin, said he hoped the market would become even more affordable.
“We all love Melbourne and would ideally want to buy in the same area we’ve chosen to live in while renting,” Mr Soibelman said.
“If house prices keep going down and rent becomes more affordable, it could change the perception many young buyers have that breaking in is unachievable.”
The report also showed affordability had improved across Melbourne during the market downturn, with the average number of years required to save for a deposit falling from a peak of 10.9 in June 2017 to 10.1 in December.
Despite this, the city remained the second least affordable Australian capital, behind Sydney.
Country Victoria is the second least affordable regional market due to relatively high values on the Surf Coast and Bellarine Peninsula.
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