Moranbah, the Queensland coal mining town and investor darling, leads a regional Queensland list compiled by RP Data of suburbs where it is cheaper to buy a house than to rent one.
RP Data estimates that it $4,021 cheaper per month to buy a house in Moranbah with a principal and interest variable mortgage than rent one.
The median asking rent for a house in Moranbah is $1,900 a week, according to RP Data.
The Moranbah council area has a population of around 22,000 permanent residents but a fly-in/fly-out (FIFO) worker population of 24,000, with a government inquiry into the sustainability of mining towns in April hearing that FIFO workers have been a key factor in driving up rents.
However, in April this year there were reports that rents and prices in Moranbah were falling due to mining companies – which take up many of the residential leases on behalf of workers – refusing to sign new leases.
At the time of the mining flare-up Terry Ryder of hotspotting.com.au said the situation highlighted the danger of investing in a mining town, where prices are “a bit artificial”.
“A single major employer can use its market power to achieve something such as forcing down rents,” Ryder told Australian Property Investor magazine.
“A lot of investors have been getting very excited about Moranbah. This is a classic example, which may inject a bit of reality into the situation.”
Westpac recently tightened its lending requirements for mortgages to buy property in "single-industry" towns like Moranbah.
Current listings that Property Observer estimates would be significantly cheaper to buy then rent include this four-bedroom, two-storey house on a large block on Mills Avenue (pictured below) being sold by Mackay agent Julie Williamson with an asking price of $750,000.
The property has a two-year lease in place at $1,800 per week, or $8,100 per month.
Providing a 10% deposit and borrowing $675,000 on a 25-year principal and interest loan with a 6.25% interest rate would mean monthly mortgage repayments of around $4,500 per month.
Another example of a property that is cheaper to buy then rent is this two-level, four-bedroom house on Bradman Street (pictured below), being sold by Craig Aitcheson & Roz Robinson from LJ Hooker Mackay with a price tag of $549,000 and with the possibility for development at the back of the property, subject to council approval.
The property is expected to command rent of at least $900 per week, or $4,050 per month.
Providing a 10% deposit and borrowing $494,000 on a 25-year principal and interest loan with a 6.25% interest rate would mean monthly mortgage repayments of around $3,300 per month.
Yet another example is 8 Goolagong Crescent (pictured below), also a four-bedroom, two-level house being sold by Marie Plahn of Moranbah Real Estate, where the price has been reduced by $100,000 to a negotiable $690,000.
Plahn says the property can command weekly rent of $1,200 per week or $5,400 per month.
Providing a 10% deposit and borrowing $621,000 on a 25-year principal and interest loan on a 6.25% rate would mean monthly mortgage repayments of around $4,100 per month.
To come up with its calculations RP Data compared the cost of a mortgage vs the cost of renting in four different ways: 1, Principal and interest loan on a variable mortgage rate; 2. Interest-only loan on a variable mortgage rate; 3. Principal and interest loan on a three-year fixed mortgage rate; and 4. Interest-only loan on a three year fixed mortgage rate.
The comparison does not take into consideration stamp duty, associated buying costs and strata fees, where applicable.
The data contains both units and houses, but in most suburbs on the list it is cheaper to rent a unit than buy one.Click to enlarge