Less than a fifth of Victorian homes are more affordable to buy than rent, with the state having drastically less stock than the rest of the nation.
PropTrack’s Market Insight report, released today, showed 16.6 per cent of the state’s dwellings are cheaper to buy than lease — considering current purchase and rent prices as of October this year.
Based on the latest Census data, this is only around 448,000 homes of 2.7m dwellings in Victoria.
This compares to more than a third of properties considered more affordable to buy than lease nationally.
PropTrack senior economist Paul Ryan said it was “much more favourable” based on the data to be looking to purchase a unit rather than a house.
“If rents grow much sharper, anywhere close to what we’ve seen over the past year or so, that could tilt the table towards buying and I think we’re seeing that in first homebuyer activity,” Mr Ryan said.
“Those first-home buyers who have been crimped in the rental market are looking to get their own home even though it might be more expensive in the short run.”
Only around 26,000 houses (2.2 per cent) across Melbourne were more affordable to purchase than lease compared to around 323,000 units (38.5 per cent).
Stonnington West, Port Phillip and Melbourne City were tipped as having the largest share of homes where it was less of a financial burden to be a homeowner than a tenant.
Mr Ryan added that the proliferation of high density housing in areas like South Yarra could be adding more properties to the market leading to a drop in prices.
However, Property Mavens chief executive and buyer agent Miriam Sandkuhler said she would caution property investors to buy in these areas, as a high proportion of these “homes” were very small units in precincts dominated by tightly congested development.
“Calling these ‘homes’’ can be quite misleading,” Ms Sandkuhler said.
“Many have entered the short-term rental accommodation market (i.e. Airbnb) and these developments typically have higher real vacancy rates thanks to a higher proportion of overseas investor owners.
“Another consideration to factor in is the often high owners corporation costs in these newer buildings.”
While PropTrack showed more than three out of four homes in Perth were considered cheaper to buy than rent, Ms Sandkuhler said employment prospects of the mining industry had an exaggerated impact on the city’s property market fortunes.
“(It’s) much better to be invested in Melbourne with higher population growth, the number one state economy according to CommSec with a much broader base and a more favourable home price to average income ratio,” she said.
She said great property options for first home buyers and investors were closely correlated right now, suggesting opportunities for three-bedroom homes under $1m could be found in Melbourne’s outer east and southeastern suburbs like Croydon, Ferntree Gully, and Heathmont – but cautioned to be highly selective.
Ms Sandkuhler also said 1960s and 70s apartments in Melbourne’s inner and middle ring areas like Moonee Ponds, Elwood, Parkville, Prahran and Brunswick were also good areas for property investors, first-home buyers and mature couples to consider.
But Australian Property Home Loans director Adele Andrews said even prospective buyers in a position to purchase were still being cautious causing “a bit of a stalemate” in the market.
“There’s not so many properties coming out on the market,” Ms Andrews said.
“Because of that, people can’t find anything that they want to live in; because they can’t find something they want to live in, they’re not selling what they’ve got.
“I just don’t really know what’s going to be the catalyst to change it.”