For the first time in years, a narrow opportunity has emerged in Australia's housing market: in select locations, it is actually cheaper to service a mortgage on a unit than to pay rent. But this silver lining comes with significant caveats that limit its practical value for most prospective buyers.
Research by data firm Cotality has identified 20 regions nationally where mortgage repayments cost up to $102 more per fortnight than rent. Within those regions, unit buyers can achieve real savings. In Melbourne's city region, a unit buyer would save $322 a fortnight compared with renting. In Sydney's Liverpool area, the saving amounts to just $20 a fortnight, while Merrylands-Guildford offers $38 savings and Parramatta $40 per fortnight.
The catch is blunt: this calculus applies only to units, not houses. For anyone seeking a standalone property, the affordability mathematics work decisively against buying. In Melbourne, even in the most favourable region (Melton-Bacchus Marsh), a house buyer faces an extra $520 per fortnight in mortgage costs compared with renting. Sydney suburbs showed no advantage whatsoever for house purchasers.
This disparity reflects a fundamental shift in supply dynamics. Cotality head of research Gerard Burg noted that house values have climbed significantly over the past five years whilst unit values in many markets have stagnated or declined. Melbourne's CBD serves as the clearest example: unit values peaked in June 2017, then fell as successive waves of apartment development flooded the market. High supply has suppressed both prices and mortgage repayments, even as rents have inched upward.
The mechanism at work here is instructive about housing economics more broadly. Negative gearing, the tax treatment that allows property investors to claim losses on investment properties against other income, suppresses rents by enabling landlords to operate at a deliberate loss. Paradoxically, this policy setting means that in areas where construction has saturated the rental market with units, the incentive structure is reversed: rents become expensive relative to what a new mortgage would cost.
Yet economists warn that viewing these pockets of opportunity as a broader solution would be misguided. PRD chief economist Diaswati Mardiasmo acknowledged that stock availability drives current affordability in specific suburbs. "There is definitely more units available and that has made the Melbourne CBD one of the more competitive markets," she said. But she cautioned that first-home buyers cannot simply look at mortgage versus rent figures in isolation.
Prospective buyers must first save a deposit, pay stamp duty, and account for ongoing expenses invisible to renters: council rates, body corporate fees, insurance and maintenance. Beyond the cash flow calculation, homeownership carries what Burg termed "the biggest hurdle": accumulating the initial deposit. The deposit remains the primary barrier, not the weekly comparison of mortgage and rent.
The research also highlights a structural vulnerability in relying on supply-driven affordability. Markets shift. If Melbourne's flood of unit supply slows or demand rebounds, the current savings may evaporate. Westpac reported in March that consumer sentiment about buying peaked before declining sharply, reflecting broader pessimism about the trajectory of the market.
What does this mean for housing policy? The conventional wisdom that "rent is dead money" demands revision in light of these findings. Renting provides flexibility and lower transaction costs that mortgage holders do not enjoy. For many Australians, particularly those without substantial savings or facing uncertain employment, renting remains the more pragmatic choice.
For first-home buyers positioned to purchase, the emerging affordability in selected unit markets deserves attention. But it should not distract from the deeper challenge: most Australians cannot access these savings because they lack the deposit capital and the income to qualify for a mortgage. Building more homes, across all price points, remains the fundamental answer to affordability pressure.