The suburbs that are cheaper to buy than rent

The 2025 real estate markets have kicked off with buyers holding the upper hand, which has resulted in many renters weighing up the financial benefits of buying versus renting.

With the recent interest rate drop, and another one on the cards, it is becoming more attractive to borrow money. The cost of renting, meanwhile, has skyrocketed over the past two years.

Why is it cheaper to buy than rent?

The wage price index (WPI) measures the changes in wages and salaries in the Australian labour market.

We have seen the WPI rise by 0.7 per cent in the December 2024 quarter, giving a 2024 annual increase in wages prices of 3.2 per cent. This, however, is not keeping pace with the increase in rental price growth that clocked up an 11.1 per cent increase.

This means the rental market is increasing faster than wage price growth and it soon becomes unaffordable.

This discrepancy between wages and rental growth and the decline in interest rates makes it even more attractive to borrow and buy a property. We are not seeing this same correlation between interest rate decline with rental prices decline, and the expected interest rate cuts in 2025 may improve affordability​ to buy property.

Of course, the decision whether it’s cheaper to buy or rent is going to differ from person to person because it will rely on multiple factors, such as how much deposit you have saved, what your loan repayments will be, as well as property holding costs.

Where is it cheaper to buy than rent?

When considering if it is cheaper to buy than rent, we are considering house prices compared to the rental costs.

There are several locations across Australia where it is cheaper to buy a property than rent. According to PropTrack Market Insight report, about 36 per cent of Australian homes are currently more affordable to purchase than to rent, with Queensland, Western Australia and Tasmania offering the most opportunities for buyers​.

Typically, the expense of the capital cities means buying is very expensive, but if you look to the middle-ring and outer-ring suburbs, the benefits of buying over renting become more evident.

Many regional towns will also lean more to buying than renting. Consider areas where an investment property is likely to be positively geared, whereas in the heart of the capital cities your investment would likely be negatively geared (meaning it costs you more to own than to rent).

New South Wales

In Sydney’s CBD, Ultimo is favoured by students as it is close to both University of Technology Sydney and the University of Sydney. The median rent for a unit is $750 per week, with the average cost to buy around $690,000.

Mascot, only 5km out of the CBD is another spot where you may consider buying if you’re a renter. The median rent for a unit is $970pw but the median cost to buy is $780,000. But the same does not play true for houses. It plays the opposite if you want a house, with the rental market for houses paying around $950pw to rent but to buy you are forking out around $1.9 million.

Queensland

Close to Brisbane, places like Newstead may be cheaper to buy than to rent. The median weekly rent is $750pw for a unit, but the median cost to purchase is $685,000 and for houses it is $865,000.

Mining towns like Moranbah, with the cost of rents being up around $750pw for units and $700pw for houses, it is much cheaper to buy a unit for the median price of $330,000 and $361,000 for a house. There is a lot of risk though when buying in a mining town. When it comes time to sell, you may find this difficult but there is a lot of demand in the rental market.

Victoria

If you’re renting a unit in Carlton you are likely paying around $550pw rent but may be better off buying with median prices for units around $407,000.

Another top spot to buy rather than rent is Notting Hill, which sets you back $550pw to rent a unit but with an affordable median purchase price of $342,500. Houses are a lot more expensive in this area though, with the median purchase price more than $1,110,000 with rents only around the $580pw mark.

Western Australia

If you’re renting a unit in Fremantle, there may be the opportunity to buy instead. The median rental cost for a unit is $720pw compared to the average purchase price for a unit of $580,000. This is a great opportunity given that Fremantle is a large centre, second to Perth.

Mandogalup, south of Perth, and Fremantle may not have the long-term capital growth (and negative growth in the past 12 months), however, rentals are in high demand. They have skyrocketed to around $720pw for a house, but the median price of houses is an affordable $349,000.

There is a large risk that when it comes time to sell you will find it extremely difficult but in terms of rent vs buy, you will be saving more than a “pretty penny” to buy and pay a mortgage than your high weekly rental costs.

Why is this the case? Because no one particularly wants to buy property here. The demand for houses is very low but a lot of workers here are FIFO, so the demand to rent is extremely competitive. Most likely, it will be large corporations paying these high rental costs for their workers. We would not recommend this for an investment choice given the high risk and the lack of industry.

South Australia

When renting a house in Davoren Park, you may be surprised that you could be buying the property for cheaper than your rent. The median rent for a house is around the $500pw mark and the median price of houses in this area is $480,000. There has also been some excellent growth here with the 10-year average annual growth rate sitting at 23 per cent.

What to look for in the rent versus buy decision

Lower property prices: Look for areas that have relatively low purchase prices, making mortgage repayments cheaper than rising rental costs.

Strong rent growth: Locations that have high rental demand, particularly in capital cities where rent prices have surged, homeownership might be more attractive​ than renting.

Unit market opportunities: In many capital cities, unit prices remain lower than rent, making them a better option for buyers​.

Current challenges for the rental market: Some rental markets are at their highest levels, with research showing that almost half of renters are spending more than 30 per cent of their income on rent. Sydney and Perth lead the rental price surge due to their tight rental markets.

​Other property expense considerations

The cost to buy property

When it comes to buying property, there are other costs that need to be factored in.

When we have considered locations where it might be cheaper to buy than rent, we are looking at the typical average mortgage repayments of a location verses the typical median rental costs of that location, and excluding the upfront costs of buying a property as well as the ongoing maintenance costs of property ownership.

Some of these costs that you will need to consider when buying a property include:

Deposit

Typically, lenders require a deposit of 10 to 20 per cent of the property’s value. If the deposit is less than 20 per cent, lenders mortgage insurance (LMI) may be required.

Lenders mortgage insurance (LMI)

LMI is payable on top of your deposit if you are borrowing more than 80 per cent of the property’s value, and the amount is dependent on the loan value. This insurance protects the lender, not you as the borrower.

Stamp duty (transfer duty)

There may be some government concessions for first home buyers, so check with your state government for any current grants and schemes available.

Loan establishment and ongoing fees 

There will be a loan application fee upon set-up of your mortgage, as well as ongoing monthly or annual fees for managing the loan account.

Conveyancing and legal fees

You will need to hire a property lawyer or conveyancer to review the contracts, which comes at a fee of $1,000 to $3,000 depending on the complexity of the work involved.

Building and pest inspections

This report is vital to check if there are any structural issues or pest problems before you purchase a property.

On-going costs of home ownership

There are various annual, quarterly and monthly maintenance and ongoing costs of home ownership. These include (but are not limited to) home and contents insurance, council rates, utility costs, strata fees (for apartments), regular maintenance and renovation costs.