Historic low-interest rates and new Government grants have opened a unique window to purchase properties with monthly mortgage repayments up to 55% less than rents on the same value properties.

For years now, one question has kept many renters awake at night, “Should I keep paying ‘dead’ rent or take a leap of faith and buy a place of my own?”

Traditionally, renting has been cheaper than buying in Sydney and Melbourne.

However, one of Australia’s leading property buyer’s agents has found that current economic conditions have created a once-in-a-generation opportunity for renters to move into home ownership.

What is making buying property cheaper?

Zaki Ameer, founder of buyer’s agency DDP Property says, “Analysing the numbers, it’s actually much cheaper to buy property right now than to rent in Sydney and Melbourne, and we probably won’t see anything like this for decades.”

While interest rates have been attractive for some time, government stimulus and assistance during COVID-19 mean the RBA rate has dropped to historic low levels.

Ameer calculated that current lending interest rates of around 2.19% put home buyers in a far better financial position than if they continued to rent.

“To rent a one-bedroom unit in Sydney’s Inner West costs around $580 a week. You could buy an identical place for $650,000 and lock-in weekly interest only loan-repayments of $260 a week. That’s a saving of over $14,000 each year, excluding the added benefits of capital appreciation on your property”.

Furthermore, with attractive new Government grants such as the HomeBuilder Scheme, home buyers will receive an added contribution of $25,000 towards their new home purchase. Previous grants such as the First Home Owners contribution of $10,000 also apply.

Should renters commit to a mortgage now?

If renters can get hold of 5% for a deposit, now is the best time to buy.

“If we look at the history of the property market, despite economic downturns, property continues to go up in value over time. The pandemic will pass, the economy will rebound and before we know it property prices will be out of reach for many people again.”

A bigger reason to buy at the moment 

According to Ameer, it’s not difficult to secure a five-year fixed interest rate repayment plan on first home loan mortgages from banks.  Whereas with rent, landlords are likely to raise prices each year as populations grow. For lenders who offer P&I loans, the additional amount will go towards paying off your home-loan down.

He points out that while there are significant short-term benefits to owning, the greatest returns come over time, “Five years of rent to your landlord could be $100,000 paid down towards a house that you own”.

Example comparisons of owning vs renting in Sydney and Melbourne* 

(Disclaimer: the above refers to interest only repayments. It does not include legal fees or Lenders Mortgage Insurance. Calculations do not include benefits such as First Home Buyers Grant up to $10,000, HomeBuilder Scheme $25,000 grant, Stamp Duty Concessions and DDP cash-back offer of up to $30,000).