Get the complete and complimentary ‘Buy v Rent’ report and spreadsheet here: http://www.myrp.com.au/buyorrent
This week RP Data released the Buy versus Rent report. The report turned out to be more popular than we expected – the number of people trying to download the free report and Excel spread sheet overloaded the servers that run the myrpdata.com web site which resulted in a slow load and problems downloading the files. Sorry to anyone who experienced difficulty. The load has now eased, so you shouldn’t have any problems accessing the site now and downloading the report and Excel file (http://www.myrp.com.au/buyorrent).
The report compares the costs associated with servicing a mortgage across four different scenarios:
- Paying off the principal and interest on a variable mortgage rate
- Paying interest only on a variable rate
- Paying off the principal and interest on a 3 year fixed rate
- Paying interest only a three year fixed rate
The loan principal is based on a 90% loan to valuation ratio taken from the median value of a house or unit in the suburbs. The calculations are based on monthly repayments over a loan period of 30 years and the interest rates used are 6.15% (discounted variable) and 5.9% (3 year fixed).
These costs are compared with the typical cost of renting in the suburb. It’s important to note, there are additional costs involved with owning a home which are not factored into the analysis (costs of purchase such as stamp duty, legal fees, inspections etc, rates and maintenance are some examples), nor does the analysis factor in any capital growth involved within owning a home.
The headline findings showed there were 238 suburbs nationally where servicing a loan was more affordable that paying the landlord based on the most popular principal and interest scenario with a variable mortgage rate. Based on an interest only loan with a fixed rate over three years the number of suburbs expanded to 1,759 suburbs nationally.
Anyway… all these findings and detailed tables are available in the report which can be downloaded here for free: www.rpdata.com/buyorrent
What I wanted to focus on here is the benefit of downloading the spread sheet (also available without cost at the same location as above). For anyone with rudimentary Excel skills, this freely downloadable spread sheet is a great starting point to get a feel for the costs associated with renting or buying in any suburb around Australia.
For those without those skills, I’ve provided a few tips on what to do below. The spread sheet can be sorted and filtered to zero in on the suburbs that best your lifestyle or budget. For those Excel novices you can get some further hints at http://www.exceltip.com/
For the first example, say you wanted to live within 20km of the Brisbane CBD and didn’t want to spend more than $100 per week more than what it costs to rent. Simply filter the list and voilà – here are the results:
As another example, if you really wanted to live in a house in the Eastern Suburbs of Sydney and were wondering what the costs were with renting any buying, you can search the list like this:
The scenarios you can investigate using this tool are pretty much endless.
In the vast majority of locations it remains more affordable to rent a home than it does to service a mortgage. Broadly it is the unit markets where mortgage payments tend to be the closest or more affordable than rental payments. Similarly, at least within the capital cities, it is generally the outer ring suburbs that typically show the most suburbs that are more affordable to buy a home than rent one.
Importantly we would encourage prospective buyers to undertake their own investigations. Every person’s circumstances are unique and the figures presented above are a guide only. There are always going to be differences across individual properties.