Melbourne Renters Save Hundreds Monthly Versus New Mortgage Holders, Data Shows

For the first time in years, renting a typical Melbourne home is cheaper than buying one. That is if you are taking out a new mortgage today.

Analysis by property data firm PropTrack shows the median weekly rent for a Melbourne house now sits at $580, while the estimated weekly mortgage repayment on a median-priced house, based on a 20 per cent deposit and the average variable rate, is $742. That is a gap of $162 a week, or roughly $648 a month. For units, the difference is narrower: median rent $490 versus mortgage repayments of $505, a margin of just $15 a week.

The affordability arithmetic

The numbers partly explain why Melbourne’s auction clearance rates have hovered around 60 per cent through winter, a level that suggests a buyers’ market but not a rout. The Reserve Bank held the cash rate at 4.35 per cent again in June, the 13th consecutive hold, and most lenders are pricing variable mortgages above 6.5 per cent. First-home buyers, already squeezed by price growth in suburbs such as Hawthorn and Brighton, are now staring at mortgage bills hundreds of dollars higher than the rent on similar properties in those same suburbs.

Take a three-bedroom house in Glen Iris, a favoured corridor for families priced out of Camberwell. Median house price in the 3146 postcode is about $1.85 million, according to CoreLogic. A 20 per cent deposit of $370,000 still leaves a loan of $1.48 million, and monthly repayments of roughly $9,400 at 6.6 per cent. The median three-bedroom house rent in Glen Iris is about $850 a week, $3,683 a month. That is a monthly gap of nearly $5,717.

Even in the more affordable Frankston growth corridor, the arithmetic is stark. A median house price of $780,000, with a 20 per cent deposit, yields a monthly repayment around $4,000. Median rent in Frankston is about $520 a week, $2,253 a month. The tenant is saving $1,747 a month, but they are not building equity either.

Case in point: Little-known policy bonus

For the roughly three million Australians eligible for the federal government’s Home Guarantee Scheme, which allows a purchase with as little as 5 per cent deposit, the calculus shifts. A buyer in Melbourne’s outer suburbs could use the scheme to get into a $650,000 townhouse in places like Werribee or Melton. At 5 per cent deposit, the loan is $617,500, and monthly repayments at 6.6 per cent are about $3,940. Rent on a comparable property in those suburbs averages $430 a week, $1,863 a month. The tenant still saves $2,077 a month, but the buyer is on the property ladder and locked in a price before any further rises.

The Victorian government’s own data, released in May, shows the state’s rental vacancy rate sits at 1.4 per cent. That tight supply is pushing rents up 8.1 per cent annually across the city, according to the Rental Report from the Department of Families, Fairness and Housing. Meanwhile, house values in Melbourne have risen just 2.1 per cent over the same period, well below the pace of rent growth.

So what does this mean for anyone debating whether to sign another lease or fight for a loan approval? The short answer is that renting is cheaper on monthly cash flow, but buying locks in a fixed cost and long-term capital gains. For those who can scrape together a deposit, the Home Guarantee Scheme can make the jump viable even in the current rate environment. For the rest, the math says keep renting and save aggressively, because the rent vs buy gap, while real, is narrow enough that even a single rate cut could flip the equation.