ANZ CoreLogic Housing Affordability Report shows it's almost cheaper to buy a Canberra unit than to rent

The ANZ CoreLogic Housing Affordability Report, published on Thursday, shows the portion of income required to service a mortgage for a Canberra unit is now 23 per cent, only slightly higher than the 22.6 per cent of income required to rent a unit.

As for houses, Canberrans would need to set aside 39.8 per cent of their income to service a mortgage, compared with 30 per cent to rent.

The near parity between mortgage and rent costs in the unit market isn't lost on first home buyers like 27-year-old Bethany Daniel, who recently purchased an apartment in Turner.

Ms Daniel had previously rented in Canberra but decided to move back in with her mum last year to save the rest of her deposit. She said her mortgage repayments are very similar to what she paid as a renter.

"Every place is different but on the whole it did seem a lot cheaper to just pay a mortgage instead of renting," she said.

"My mum was looking to rent an apartment in a similar area to me ... she was looking at around $100 more a week for rent compared to buying."

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The price gap between mortgage and rent serviceability is similar for units in Adelaide and Brisbane, but vastly different to Sydney, where people are required to put 38.3 per cent of their wage towards a mortgage on a unit versus just 26.8 per cent towards rent.

CoreLogic head of research Eliza Owen said Canberra has a large portion of "young professionals on relatively high incomes", many of whom feel empowered to buy.

"That decision to go from renting to buying is likely something that's already been enacted but it makes reasonable sense that if the gap is closing between mortgage and rent serviceability then people will make that jump if they can," she said.

Canberra's median dwelling value, which encompasses all housing types, is now 7.2 times the median annual income for the city. The ratio of property value to income was 5.2 in March 2020 at the onset of the COVID-19 pandemic.

Canberra house values are now 8.2 times the average income, compared to 5.9 in March 2020.

Canberra units were found to be significantly more affordable with a 4.7 value to income ratio, up from 3.7 per cent in March 2020.

The number of years it takes Canberrans to save for a deposit has increased as well.

It currently takes Canberrans an average 9.7 years to save for a 20 per cent home deposit. Hopeful buyers are likely to be saving 6.3 years to save for a deposit on a unit or 10.9 for a house.

Ms Daniel said it took about five years to save for her deposit, including a stint moving back home. She also made use of the federal home guarantee scheme, which allows first home buyers to secure a home with as little as a 5 per cent deposit.

"Even as a teenager, I was pretty good at saving my money envisioning that one day I would buy [a property]," she said.

"So I sort of slowly saved my deposit and then in the last year, I ended up moving back in with my mum to save a bit more money a bit more seriously, and really saved a decent amount of the deposit in the last year."

Loan Market Canberra franchise owner Nitish Kumar, who helped Ms Daniel secure her loan, said most of his first home buyer clients are weighing up the cost of rent versus a mortgage.

"In most, if not all, cases at the moment for first time buyers, the mortgage payments are less than what their rent is," he said.

"Canberra does obviously have a very high disposable income, but we also have very, very strong rental yields. So the rents are extremely high compared to everywhere else in Australia, which makes it almost better to buy than rent."

Mr Kumar said although buyers are factoring in future interest rate rises, rents may also increase.

"I do think investors are going to start increasing the rents as their interest rate increases, so that affordability between rental and mortgage payments is going to stay relatively similar if investors are also increasing their rents," he said.

Outside of Canberra, regional markets suffered some of the greatest declines in affordability, according to the report.

Nationally, the median regional house price was 7.9 times the annual regional household income in March 2022, up from 5.9 times two years ago.

The report also found that it would take 10.5 years for regional households to save enough for a 20 per cent deposit.

Chief among the reasons for the growing unaffordability was an uptick in tree changers who had taken advantage of flexible working policies to relocate to the regions.

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With capital city incomes an estimated 32.6 per cent higher than those in the regions, according to ABS data, the report authors said that these buyers enjoyed a considerable affordability advantage over existing regional residents.

The median regional property price is only six times a capital city household income, compared to 8.4 times for median capital city values, meaning regional housing represented significant affordability advantages for buyers who were able to relocate without losing their jobs.

"There is a segment of the workforce that never have to go to the office and so for them, looking [at housing], they are earning perhaps capital city wages but they could maybe move to a region and live there," ANZ senior economist Felicity Emmett said.

"It does make it relatively very affordable to move to the regions and that is crowding out some of these longer standing residents in the regional areas, and that's whether they are renting or they are buying, but they are bringing these much higher incomes," she added.

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