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As investors ramp up activity, is Australia becoming a nation of renters?

launchgroup.com.au > Blog > Uncategorized > As investors ramp up activity, is Australia becoming a nation of renters?
5 Mar

As investors ramp up activity, is Australia becoming a nation of renters?

launch-admin Mar 5, 2014 0 512

Media Release

 

  • First homebuyers being pushed out of the market by investors
  • Huge differences in affordability in Sydney & Melbourne compared to other capital cities
  • Strength of rental market creating opportunities for astute landlords

 

Wednesday 26 Feb 2014 – Australia’s property market continues to see strong growth but first home buyers are increasingly being left behind. In Sydney and Melbourne, the cost of renting is in fact less than paying off a mortgage, according to the latest analysis from Onthehouse’s property research arm, Residex. 

 

According to the latest data, the number of first time buyers hit historical lows in December 2013, to just 7% in New South Wales, 12% in Victoria, and 12% in Queensland.

 

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Source: Australian Bureau of Statistics, Category 5609.0 – Housing Finance, Australia, December 2013

           

The national median value of houses and units increased in 2013 by 5.25% and 6.4% respectively. With prices going up and with affordability falling across the country, the value of loans to investors increased by 2.3% in the final quarter of 2013.

 

John Edwards, Consulting Analyst for Onthehouse.com.au and Founder of Residex, commented: “Investors are currently taking advantage of low interest rates, particularly older generations who are now investing in property through their self-managed super funds. People are now structuring their super fund investments in such a way that allows a form of negative gearing in residential property, allowing monthly super fund contributions from their salary to cover any rental income shortfall.

 

“As a result, younger buyers and those looking to buy a first home are finding it increasingly difficult to afford to purchase property, especially in Sydney and Melbourne, and are therefore having to rent.

 

“For landlords and investors, this essentially means a bigger pool of renters – giving an added incentive to purchase residential property.”

 

In regards to affordability, the proportion of income necessary for renting or buying means that for many, it costs less to rent than buy.  In Sydney, buyers can expect to pay 39.39% more per month on loan repayments on a median-valued house than it would cost to rent, while in Melbourne it is 50.72% higher. The difference is far less in other capital cities.

 

Mr Edwards said that, although prospective younger buyers can see the cost benefits with the short term gain of renting versus buying, it should not act as a deterrent from purchasing a property.

 

“Though it can be more affordable to rent for some, people shouldn’t be put off on buying property because of this. We need to keep in mind that long-term savings from paying off a mortgage and capital gains on your own property, can outweigh the short-term benefits of affordability,” he said.

 

“Also, because there is a strong market of renters out there, now could be a good time for those looking to get onto the property investment ladder to get their foot on the first rung.”

 

 

Houses

 

 

 

 

 

Area

 

 

 

 

 

 

Median Value

Income

Monthly Loan Repayment 

Monthly Rental Payment

Difference between loan and rental payments

Affordability premium

 

 

 

 

 

 

 

ACT

$529,500

$128,754

$2,472.51

$2,204.45

$268.05

12.16%

Adelaide

$407,500

$90,266

$1,902.83

$1,583.44

$319.38

20.17%

Brisbane

$456,500

$97,454

$2,131.63

$1,909.06

$222.57

11.66%

Darwin

$576,500

$109,701

$2,691.97

$2,579.55

$112.43

4.36%

Hobart

$375,500

$90,200

$1,753.40

$1,573.56

$179.84

11.43%

Melbourne

$610,000

$99,796

$2,848.40

$1,889.84

$958.56

50.72%

Perth

$524,500

$109,637

$2,449.16

$2,071.75

$377.41

18.22%

Sydney

$771,000

$106,330

$3,600.20

$2,582.86

$1,017.34

39.39%

 

 

 

 

 

 

 

Units

 

 

 

 

 

 

Area

 

 

 

 

 

 

Median Value

Income

Monthly Loan Repayment 

Monthly Rental Payment

Difference between loan and rental payments

Affordability premium

 

 

 

 

 

 

 

ACT

$408,500

$128,754

$1,907.50

$1,839.42

$68.07

3.70%

Adelaide

$305,000

$90,266

$1,424.20

$1,305.61

$118.60

9.08%

Brisbane

$355,000

$97,454

$1,657.68

$1,637.50

$20.18

1.23%

Darwin

$431,000

$109,701

$2,012.56

$2,113.64

-$101.08

-4.78%

Hobart

$257,500

$90,200

$1,202.40

$1,212.31

-$9.91

-0.82%

Melbourne

$449,500

$99,796

$2,098.95

$1,680.90

$418.04

24.87%

Perth

$454,500

$109,637

$2,122.29

$1,932.95

$189.35

9.80%

Sydney

$537,000

$106,330

$2,507.53

$2,252.52

$255.01

11.32%

 

Source: Onthehouse.com.au / Residex

 

The data shows that there are just two cities where it is more affordable to buy a property compared to renting one. In Darwin, paying off a loan on a median value unit costs on average $101.08 per month less than renting (-4.78%), while in Hobart an owner could expect to pay $10 per month less (-0.82%).

 

Mr Edwards commented: “The increasing activity of investors has been a feature of the market for a number of years and can be traced back to the start of significant affordability issues for home owners. It’s also expected that investors will be ramping up their presence in the market.

 

“Overall, the general indicators suggest that Australia is moving to a situation where a large number of families are going to be renters unless something occurs that diminishes housing costs. Renting in capital cities looks as though it will be the natural outcome for young working families in these areas.”

 

For both the first-time and the savvy investor, more information is available at: http://investors.onthehouse.com.au/

 

 

– ENDS –

 

                                                                       

Media contacts

Ashford Pritchard: E ashford@launchgroup.com.au  / T 02 9492 1040 / M 0411 020 680

Laura Douglas: E laura@launchgroup.com / T 02 9492 1000 / M 0452 505 859

 

About onthousehouse.com.au

www.onthehouse.com.au is Australia’s most transparent and comprehensive real estate portal, empowering consumers to make informed property decisions by providing them with free access to information. Over 1 million unique browsers visit onthehouse.com.au every month to search listings and view in-depth property data, making it Australia’s third most popular real estate platform.

 

Onthehouse.com.au is the flagship consumer offering of Onthehouse Holdings (ASX:OTH), the 360-degree property market services group that provides comprehensive real estate agency solutions, information and analytics services. Onthehouse Holdings businesses together help over half of Australia’s real estate agencies, as well as being used by financial institutions and other property-related professionals.