Renting vs Buying: Comparing Soaring Rents to Mortgage Costs

This guide from Brooklyn Homes compares the real monthly cost of renting versus owning, then layers in deposits, stamp duty, Lenders Mortgage Insurance, ongoing owner costs, and the opportunity cost of capital. It shows where renting preserves cash flow and flexibility, and where buying compounds wealth through leverage and forced saving.

Use the city by city sections to anchor numbers for comparable properties, then run the break even scenarios with your own assumptions on price growth, rent growth, and investment returns. Finish with the decision framework to stress test serviceability, buffers, and time horizon.

How To Read The Numbers And Assumptions

This analysis uses public benchmarks from sources such as the Reserve Bank of Australia, Australian Bureau of Statistics, CoreLogic, Domain, SQM Research, RateCity, and state revenue offices. Numbers move frequently, so pair the framework with current medians for price and rent in your suburb. Treat any example calculations as templates that you should re-run with live inputs.

Mortgage, Rent, And Return Assumptions

Repayments depend on loan size, product type, and rate structure. Compare like for like properties when assessing a rent versus own gap. For returns, model a conservative range for property appreciation and a long run portfolio return for invested savings. For rent growth, apply a realistic trend rather than peak surge periods.

Real Estate & Development Market Context

Affordability has tightened as prices press higher while wages growth lags. Listings remain below long run averages in several capitals, which props up prices and keeps competition elevated. Rents have moderated from prior spikes but remain high relative to incomes, with vacancy rates still low in many suburbs. The net effect is a wide monthly cost gap between renting and owning in most locations, with a few exceptions where units in specific suburbs approach parity.

Interest rate settings influence both sides of the decision. Variable mortgage rates respond to the cash rate path, while rent growth reflects supply, investor activity, and household incomes. The outlook suggests gradual easing, not a return to ultra low conditions. Budget scenarios on a higher for longer range and stress test any purchase at rates that are at least 2 percentage points above your entry rate.

City By City Comparison Of Monthly Costs

Sydney

The monthly gap between a typical owner occupier mortgage and equivalent rent is wide for houses and narrower for units. Inner ring suburbs show the largest differentials. Units close to transport nodes can present the most balanced comparison.

Melbourne

The purchase premium versus rent is material but less severe than Sydney for many properties. Outer ring family homes often show a wider gap, while well located units in mid rise buildings can be closer to neutral.

Brisbane

Strong population inflows and limited stock support both prices and rents. The rent versus own premium typically favours renting in the short term, while long term buyers benefit from ownership discipline and potential appreciation linked to infrastructure investment.

Perth

Tight vacancy and relative value keep conditions unique. Selected unit markets can approach or even dip below rent parity for well qualified buyers. Validate suburb level data before acting.

Adelaide

Balanced conditions with steady demand. The monthly gap usually favours renting at entry but narrows meaningfully for buyers who access concessions and purchase well maintained stock with modest body corporate fees.

Upfront Costs That Change The Entry Decision

Deposits, stamp duty, and transaction costs dominate the entry equation. First home buyer concessions, the First Home Guarantee, and state schemes in Queensland and South Australia that remove stamp duty on new homes can reduce the entry hurdle dramatically. Without these, upfront outlays escalate quickly through duty, legal, inspections, and lender fees. Renters face far smaller entry costs, usually a bond, advance rent, and contents insurance.

Ongoing Owner Costs

Ownership carries recurring obligations that renters do not pay directly. Budget annually for council rates, building and contents insurance, body corporate fees for strata property, and maintenance. Investors should add land tax where thresholds apply and allow for vacancy and repairs. The true comparison is rent today versus the full carrying cost of ownership today.

Rent Versus Own Cost Components

Opportunity Cost Of Capital

The deposit and the monthly gap between owning and renting have alternative uses. If you rent and consistently invest the difference into a diversified portfolio, compounding can rival or exceed equity gains in low growth property scenarios. If you buy, you capture leveraged exposure to property returns and force a savings habit through principal reduction. Your behaviour determines which path wins. If you will not invest the gap consistently, ownership discipline has an edge.

Break Even Scenarios

Break even occurs when the total wealth from owning exceeds the total wealth from renting and investing the difference. The crossover timing depends on property growth, rent growth, mortgage rate, deposit size, transaction costs, and how diligently a renter invests.

For a unit in a large capital city, a modest deposit with access to Lenders Mortgage Insurance waivers or guarantees can pull break even closer by reducing entry costs. For a freestanding house with full stamp duty and higher maintenance, the owning path can take longer to overtake a disciplined renter. Model both paths over 10 years and 15 years, include selling costs, and test ranges for appreciation and returns.

When Renting Makes Sense

• You expect to move within 5 years, value flexibility, or anticipate career relocation.
• You cannot cover a full set of owner costs on top of the mortgage while maintaining a 6 month emergency fund.
• Your forecast for local price growth is weak relative to what you can reasonably earn by investing the rent gap.
• You prefer liquidity and lower concentration risk over leveraged exposure to a single asset in one location.

When Buying Makes Sense

Long time horizons favour ownership, especially for households able to access concessions and buy in areas with strong fundamentals such as employment growth, infrastructure, and tight supply. The principal residence capital gains tax exemption remains a powerful advantage for long hold periods. Dual income households with stable employment and buffers can absorb volatility while compounding equity through principal reduction and potential appreciation.

Decision Framework You Can Use Today

1. Confirm non negotiables. Stable employment, intent to stay put for at least 7 years, and a 6 month cash buffer after settlement.
2. Price the exact home you would buy and the equivalent rental. Use suburb level medians and real listings, not city wide averages.
3. Build a full ownership budget. Add rates, insurance, body corporate if relevant, and maintenance to the mortgage. Compare that total to rent.
4. Stress test. Model mortgage payments at rates that are 2 percentage points higher. Re run the budget with that number.
5. Run two paths for 10 years. Ownership path with appreciation and principal reduction against a renting path that invests the monthly gap plus the deposit. Include buying and selling costs.
6. Optimise the entry. If eligible, use the First Home Guarantee and state concessions. Aim for a property with sound fundamentals and manageable ongoing costs.

FAQs

How do I calculate my personal break even point?

Project 2 paths over time. For ownership, include mortgage, rates, insurance, body corporate if relevant, maintenance, and assumed appreciation, then add principal accumulation. For renting, add rent, contents insurance, and the investment balance from consistently investing the monthly gap plus the initial deposit. The break even year is when owner equity net of selling costs exceeds the renter portfolio.

How much deposit do I need if I use a government guarantee?

Guarantee schemes allow entry with deposits as low as 5 percent while avoiding Lenders Mortgage Insurance. Availability and caps apply. Confirm eligibility and price caps, then ensure the smaller deposit does not leave you without a cash buffer after settlement.

What ongoing owner costs should I budget beyond the mortgage?

Allow for council rates, building and contents insurance, body corporate fees for strata property, and a maintenance provision that grows as the dwelling ages. Investors should include land tax, property management, and vacancy allowance.

When does renting and investing the difference outperform buying?

Renting can win when property growth is modest, the rent versus own gap is large, and the renter consistently invests the monthly difference at attractive long run returns. Consistency is critical. If the gap is spent rather than invested, the outcome tilts back toward buying.

How should I stress test a mortgage against rate rises?

Model repayments at an interest rate that is at least 2 percentage points above your starting rate. Confirm that you can meet all owner costs at that level while maintaining your emergency buffer. If the numbers fail this test, delay purchase or target a lower price point.

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