More than a third of Australian properties have mortgage repayments that are less than rent

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Young Couple standing in front of a modern new house.

Now could be the perfect time to buy your first home.

As lending rates for housing remain at historic lows, there is one sound reason for first homebuyers to consider buying.

The key reason for making the transition from renting to owning is not the increased government incentives but rather that owning will be cheaper than renting.

It is important the first timers critically appraise their job security before diving into ownership, as the obligations are more onerous that being a tenant.

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Just before the pandemic CoreLogic data suggested that more than a third of properties across Australia (34 per cent) had estimated mortgage repayments that were less than weekly rental repayments.

Owning your own house is a good feeling

In Sydney, it occurred mainly in areas like Parramatta, Auburn and the CBD. Source: iStock

It was suggested the prospect occurred for just seven per cent of all Sydney properties. These properties were concentrated in suburbs where high levels of unit supply suppressed price growth, but there was still plenty of rental demand. These areas included Parramatta, Auburn and the Sydney CBD.

About 10 per cent of Melbourne properties were cheaper to own than rent and about 20 per cent were in this category in regional Queensland, namely the Gold Coast and Sunshine Coast. In Darwin, 77 per cent of properties had lower estimated mortgage repayments than rents.

The varied dynamics across theses cities has to do with how property values responded to interest rate reductions as the more property values increased in response to lower mortgage rates, the more the benefits of a low interest rate were eroded.

CoreLogic analyst Eliza Owen noted the data did not take into account the cost of a deposit when saving for a home. It will be interesting when CoreLogic run the data again after taking into account the impact of falling rentals arising from the pandemic amid the mild reduction in prices.

North Sydney Home Auction

There has been a dip in prices. Photo by Gaye Gerard

There are also more government incentives including the decision by the NSW state government under a targeted boost, which will eliminate stamp duty on newly-built homes below $800,000 and reduce it for properties up to $1 million.

ING released a home ownership report last month that reveals almost half of millennials think COVID-19 has made homeownership more achievable.

It seems to get on top of property goals millennials are redirecting travel budgets to a home savings account (59 per cent), taking on a side hustle (37 per cent), and moving back in with their parents (36 per cent).

Almost half of Millennials (48 per cent) say they will limit their personal shopping, reduce dining out (42 per cent) and drinking (28 per cent), give up their gym (21 per cent), and date less (24 per cent) to save for their future home.

Portrait Of Excited Couple Standing Outside New Home

More government incentives will also help. Picture: iStock.

Zaki Ameer, founder of buyer’s agency DDP Property, said millennials recognise it’s actually much cheaper to buy property right now than rent in Sydney.

Mr Ameer calculated that current lending interest rates of around 2.19 per cent put homebuyers 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”, Mr Ameer said.

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