Where is costs more to rent than pay off a mortgage in Australia despite rate rises

Australia’s rental crisis is now so bad it costs more to be a tenant than a home borrower in some beach postcodes, even after a series of aggressive rate rises.

Coastal areas, suburbs in capital cities and regional inland towns are especially expensive compared with incomes, as tenants typically spend close to half their income paying their landlord.

Monthly rents in these areas are now more expensive than mortgage repayments, despite the Reserve Bank’s 12 interest rate rises since May 2022. 

Labrador on the Gold Coast is a particularly hard place to be a tenant with a Suburbtrends analysis showing rents there cost 50 per cent of the typical household income, following a 19 per cent increase during the past year.

Suburbtrends founder Kent Lardner said rental demand on the Gold Coast was still climbing as more people relocated from places like Melbourne for the warmer climate and lifestyle.

‘You talk to anyone in Melbourne, they kind of leapfrog New South Wales and look at the Gold Coast as their first option,’ he told Daily Mail Australia.

‘It’s being loved to a point of demand outstripping their ability to produce enough supply.

‘A lot of young people gravitate to the Gold Coast for its lifestyle and they do go there to rent.

‘Yes, they have ambitions to buy but the question is, “How ready are they?’.’ 

The rental vacancy rate in Labrador is just 1.2 per cent and weekly rents for a two-bedroom unit, in the 4215 postcode, are now $654 a week or $2,896 a month, SQM Research data showed.

By comparison, it typically costs $2,716 a month to service a mortgage on a apartment, with a median price of $540,449 where a borrower has a 20 per cent deposit.

That’s based on a 6.44 per cent variable rate with the Commonwealth Bank, after the RBA in July left the cash rate on hold at an 11-year high of 4.1 per cent.

In nearby Southport – also sharing the 4215 postcode – monthly repayments on an an apartment mortgage are $2,911, based on a $579,210 median price.

That’s in a suburb where tenants are paying 46 per cent of their income in rent, demonstrating how there is little difference between renting and servicing a mortgage in a rising interest rate environment.

Renting is also more expensive than paying off a typical mortgage in the northern Adelaide suburb of Elizabeth (pictured is a two-bedroom house that has sold for $325,000)

Affordable suburbs are also dear, with tenants in the northern Adelaide suburb of Elizabeth spending 40 per cent of their weekly income on rent.

‘When you measure that relative to income, that’s when we’re starting to see some real concern,’ Mr Lardner said. 

The weekly rent of $430 for a house works out at $1,904 a month in an area with a 0.5 per cent vacancy rate and a 13 per cent increase during the past year.

Monthly mortgage repayments in Elizabeth South are $1,732 a month in a suburb where the mid-point house price is $344,625.

It’s a similar situation in the southern Queensland town of Stanthorpe where rents typically cost $437 a week or $1,935 a month for a house, eating up 34 per cent of income following a 13 per cent annual increase.

That’s similar to the median monthly mortgage repayment of $1,953 in a town where the median house price is $388,470 and the rental vacancy rate is just 0.5 per cent.

‘It’s got a very, very low vacancy rate and with those rents rising, they’re rising faster than income levels,’ Mr Lardner said.  

Mr Lardner said Queensland and South Australia in particular were suffering the most rental stress when leasing costs were compared with median household incomes from the 2021 Census.

‘This suggests that tenants in these states are feeling the greatest ‘”rent pain” at present,’ he said.

The ANZ bank is forecasting two more rate rises in 2023 that would take the cash rate to a 12-year high of 4.6 per cent.

The Reserve Bank left rates on hold this month at an 11-year high of 4.1 per cent but the 12 increases since May 2022 are the most intense since 1989. 

Inflation in May moderated to 5.6 per cent, down from 6.8 per cent in April, but it’s still well above the RBA’s 2 to 3 per cent target.