Renting vs. Buying in Sydney Explained

In a real estate market like that of Sydney, how do you determine which makes more financial sense - renting or buying?

Scroll down icon


In a real estate market like that of Sydney, how do you determine which makes more financial sense – renting or buying? For some, a mortgage isn’t yet an option, but for those that qualify and are ready to take advantage of the near record low interest rates, careful consideration is important.

At first glance, the record high prices can be intimidating. With median prices hovering at $1.1 million and expected to increase by another 9% over the next three years, buying a home right now is a large expense. But even with record high prices, there is substantial room for growth and the rental market is even more robust.

Comparing Rent and Home Buying Prices

The first step in comparing rent and home ownership is the raw cost of each. According to Numbeo, the world’s largest database of user contributed data regarding cities and countries worldwide, the average rent for a 3 bedroom apartment outside of Sydney’s CBD is $663/week. If you move closer to Sydney’s CBD, you’re looking at more than $1,061 per week. These numbers are expected to continue increasing at rates between 5-10% per year for the next three years as demand continues to severely outpace supply.

Home buyers face the same excess demand driving prices up, but with a few exceptions. To start, home construction has increased in recent years to match that demand. Second, even with increased construction, prices remain consistent. So it’s more feasible to find a home that matches your needs and budget but that will also continue to rise in value.

And with mortgage rates currently sitting below 5% and remaining there for the foreseeable future, the cost of a mortgage is about the same as renting a three bedroom apartment in a popular suburb. In a recent article in the Sydney Morning Herald, Michael Pascoe discussed the recent shift in rental prices and home prices.

It seems the cost of rent is increasing for tenants, but for landlords, the rental return is rapidly becoming a smaller percentage of the total investment. For tenants that ensures continued rising rents. So while rent will allow you to live in a space for a set period of time, your mortgage buys you equity in a piece of property that only continues to grow in value.

Should You Rent or Buy?

There is no right or wrong answer to this question. It entirely depends on your personal circumstances. If you are planning on moving to the suburbs in a number of years to start a family, then the flexibility of renting a property might make some sense.

However, if you are ready to settle down and want to build equity in a piece of property with growing value, then buying property in Sydney is rapidly becoming a world-class investment. Just remember to start with affordability in mind and capital growth potential second. If you get the first equation right then the latter will often follow, especially if your deposit is as per the bank’s preference, i.e. 20% or greater.