It’s the ultimate property conundrum – buy or rent? The answer is: it depends. Annoying, right?

But don’t be discouraged. It’s not an impossible question to answer. It just means the key factors you need to consider – prices, rent, interest rates – are constantly shifting.

It’s worth diving into the data, however, because choosing between buying and renting can be a decision that saves or costs you thousands. In some suburbs, a recent study by PropTrack found mortgage repayments can be more than $1,000 a month cheaper than renting a similar-sized property.

PropTrack’s Buy or Rent Report, released in the second half of 2022, crunched the numbers and found that despite a dramatic rise in property prices, it was still cheaper to buy than rent in many regions outside of NSW and Victoria. And units were more likely to fall into the cheaper to buy than rent category than houses in all States except NSW.

We’ll get to the nitty gritty of which suburbs offer the best buying, but first, it’s important to look at the market trends that will weigh on the market in 2023.

Prices fall

There is no doubt the dial shifted away from buying in late 2022, but this year rocketing rents may see the needle swing back as house prices cool and migration puts more pressure on the rental market. So, it’s a good time to take stock.

Median home prices fell on average 5.3 per cent across the country last year according to CoreLogic’s 2022 market wrap, with the steepest declines in Sydney (down 12.1 per cent) and Melbourne (down 8.1 per cent). Despite this, capital city prices are still about 20 per cent up on pre-COVID levels.

But it is the largest calendar-year drop since the 2008 financial crisis, driven by the Reserve Bank’s relentless nine straight rate hikes. The RBA’s cash rate went from a record low of 0.1 per cent in April to a decade high of 3.1 per cent in December.

And while many expert predictions have come undone in recent years, property analysts agree prices will continue to come off the boil in 2023 and interest rates are expected to level out at 4 per cent or lower.

Many are waiting to see how the mortgage cliff will play out in mid-2023 – when thousands of loans fixed at record low rates in 2021 will expire – catapulting borrowers onto unexpected high variable rates.

Many buyers will see monthly repayments more than double if they can’t refinance at a better rate. While that’s not good news for homeowners, for potential buyers it puts more downward pressure on prices, making it a strong buyers’ market for the first time in years.

Rentals rocket

At the same time property is cooling, the rental market looks set to go into meltdown. Last year rents leapt 10.2 per cent on average on CoreLogic data, well above the trend increase of 2-5 per cent a year.

And PropTrack’s Overseas Search Report for November 2022 noted record numbers of rental searches originating from overseas, reflecting a return to higher migration and more competition. Rising rents may swing the balance of the buy/rent equation in line-ball suburbs.

Where buying stacks up

Around the country, it’s the lifestyle States where buying is still a better option in the majority of suburbs, according to the PropTrack data.

In Queensland and WA, it was considered cheaper to buy a home in more than half the suburbs in the State, while in the NT, it was cheaper to buy in a whopping 98 per cent of suburbs.

However, the number of suburbs where buying stacked up as the better option was down substantially on the previous year, particularly in Queensland, where more than 85 per cent of suburbs were considered cheaper to buy than rent in 2021, compared to just 50.5 per cent in 2022. In WA, it fell from 81 per cent in 2021 to 59.2 last year.

There was also a marked difference between units and houses, with units offering more buying opportunities.

State by State

The PropTrack data also looked at where buying rather than renting would put the most money back in the pockets of capital city consumers.

Interestingly, units offered some of the biggest opportunities, with calculations predicting residents in the Greater Melbourne suburb of Gowanbrae could save $3,223 a month (more than $38,000 a year) if they bought instead of rented a two-bedroom unit.

It wasn’t the only area throwing up dramatic cost differences. Multiple suburbs in other States – from Mt Ommaney in Brisbane to Wanneroo in Perth – indicated potential savings of more than $1,000 a month for buyers over renters.

It’s worth noting that when PropTrack makes these comparisons, it compares the cost of owning versus renting over the next 10 years based on current property and rental averages. The calculations factor in rent and interest rate rises along with additional ownership costs such as stamp duty, maintenance, council rates and body corporate fees. Mortgage repayments were based on a 30-year-loan term at 4.62 per cent, with properties achieving 3 per cent a year capital growth.

Perhaps most significantly though, it assumes buyers have a 20 per cent deposit, something many would-be buyers struggle to save, particularly while renting. While they may have the capacity to meet monthly repayments, raising a deposit can feel like chasing a runaway train.

Many lenders now offer formal family guarantee loans that allow parents to use equity to help their children buy.

When renting makes sense

Of course, there are times renting is a sensible option – perhaps you think prices will fall, don’t plan to stay in an area, want to get a feel for a suburb, or want to live in an area you can’t afford.

The top suburbs where researchers found it was dramatically cheaper to rent were, as expected, some of the country’s most affluent areas, such as Watsons Bay in Sydney (where renting is a whopping $25,117 a month cheaper than buying), Teneriffe in Brisbane, Portsea in Melbourne and Peppermint Grove in Perth.

Run the numbers

The property market can move fast. If you would like to see how the numbers stack up in your dream location right now, get in touch.

^{Property Data: PropTrack Buy or Rent Report 2022 www.realestate.com.au/insights/proptrack-buy-or-rent-report-2022/}