Inner city areas where it’s cheaper to rent

Housing affordability continues to be a hot topic at dinner tables around the nation, yet is buying in the inner city always the best option?

Or are there some areas close to the centre of town where it is cheaper to rent rather than buy?

If you are looking for a two-bedroom home, realestate.com.au data suggests you should head south to the education state.

You might be surprised to learn that seven out of the top ten suburbs in the country where it is cheaper to rent rather than buy that kind of home are in Victoria.

Crunching the numbers

Using data from realestate.com.au/invest, the analysis compared median advertised weekly rents against median sold prices for two-bedroom homes in suburbs within 15km of the CBD.

Only areas where at least 10 houses had been sold and 10 rental properties listed over the past 12 months were included.

The data set also limited properties to those with a maximum median sale price of $650,000 stacked against a loan with a 5.6% interest rate over 30 years. The list ranks suburbs by the lowest rental yield.

Areas in the Australian Capital Territory, the Northern Territory and New South Wales failed to meet the search criteria.

Auction trends: Hot auction markets

Top 10 inner city areas where it’s cheaper to rent

Avondale Heights topped the list of suburbs where it is cheaper to rent rather than buy, which didn’t surprise Anthony Baliviera, partner at Nelson Alexander – Keilor East.

“What we tend to see is the growth rates are really high for this suburb,” he says.

The area, which is located just over 12km from Melbourne’s CBD, has plenty of good schools, leisure facilities, and a good shopping strip in Keilor Road, all of which attracts young families.

“It’s (Avondale Heights) the best you can get for this kind of price this close to the city,” he says

This two-bedroom townhouse in Avondale Heights is on the market. 

The high growth rate the area offers buyers in the long run, does mean it can be cheaper for renters in the short term.

“Whether its a two or three bedroom home, we find demand here is very high,” he says.

“In suburbs that have good growth the rent won’t cover the mortgage, there will be a shortfall.”

Parts of Avondale Heights fall within local catchment zones for several popular high schools, which also has an impact on house prices, he says.

This two-bedroom Macleod home is currently on the market.

Macleod’s place at number two in the national top 10 of areas where it is cheaper to rent than buy didn’t really surprise Cindy Annese from Miles Real Estate.

The Business Development Manager says the area “offers quite a bit” to both renters and buyers in terms of  good local shops, public transport and schools.

The infrastructure on offer in Macleod appeals mostly to young families, she says.

“We’ve had quite a range of people (renting and buying), but I’d say it’s mostly families.”

“I do think it (Macleod) offers better value because places like Heidelberg Heights don’t have that kind of infrastructure,” she says.

State-by-State

Where else around the country is it cheaper to rent rather than buy a two-bedroom home?  Here’s a state by state look at those areas, as ranked by the lowest rental yield.

Each area is listed by suburb, monthly rent price and monthly mortgage repayment.

Queensland

This Wavell Heights cottage is on the rental market for $380 a week.  

1. Wavell Heights – $1517  – $3301 
2. Coorparoo- $1733 – $3726 
3. Cannon Hill – $1777  – $3674

Victoria

1. Avondale Heights– $1343 – $3444
2. Macleod– $1517– $3665
3. Heidelberg West– $1343 – $3218

Tasmania

This Sandy Bay home is on the rental market for $385 a week.

1. Sandy Bay – $1517  – $3444  
2. West Hobart– $1603 – $ 2492 
3. North Hobart – $1549 – $2296 

South Australia

1. Plympton – $1343 – $2867
2. Glenelg North – $1593– $ 3103
3. Magill – $1343 – $2532 

Western Australia

1. Bassendean– $1517 – $3588
2. Victoria Park– $1549 – $3531
3. Bedford– $1473 – $3287

*Data correct to 1 March 2016