It is cheaper to buy a house in Perth than it is to rent, according to RiskWise Property Research.
In four of the five areas in Perth principal and interest repayments are lower than the annual rent and nowhere in the region are interest-only loan repayments for owner-occupiers higher than the annual rent.
RiskWise CEO Doron Peleg said ultra-low interest rates had created a unique environment where buying a house in many areas was cheaper than paying rent on one, as principal and interest repayments are lower than the rental payments.
He said in general, for people who want to live in Perth and eventually to own a house there, rent money was dead money, and that renters with secure jobs were better off buying a house than continue paying someone else's mortgage.
"In four of the five areas, the full mortgage repayments, i.e. principal and interest repayments, are lower than the rental costs. Also, interest-only loan repayments for owner-occupiers and investors in all of Perth are below the annual rent. This means, it's cheaper to buy than rent, so it makes no sense for people who see Perth as their home and want eventually to settle down and buy a house there not to take advantage of the current ultra-low interest rates and continue to rent," Mr Peleg said.
"For principal and interest loans, both owner-occupier and investor loan repayment amounts are lower than the annual rent in all of Greater Perth, except for Perth - Inner.
"This is especially of benefit to people who either live in Perth or want to move there and have their own house.
"If you buy a house you can start building equity, particularly when you take a long-term strategic view and are in a good position to negotiate well and buy a 'Grade A' property that will serve your family to many years to come.
"Our research also shows that nationally the interest only repayments for both owner-occupiers and investors is lower than the annual rental cost in most of the 88 areas at the statistical area level 4 (i.e. SA4s). Therefore, funding costs are lower than rental payments across all states and territories.
"And, with the exception of Sydney and Melbourne, in all other states and territories, even the principal and interest repayments are lower than the annual rent, assuming that you have 20 per cent deposit.
"No interest rate rises are expected in the foreseeable fortune and the intense competition between the banks is only going to further intensify, meaning buyers are in a very strong position to continue enjoying ultra-low interest rates."
Mr Peleg said the biggest savings were in the capital cities where rental returns were the highest.
"A sustained period of ultra-low interest rates seems almost certain in the foreseeable future and is likely to have a positive impact on the market during 2021. In fact, RBA research has found that for every 1 percentage point reduction to the cash rate, property values may increase 8 per cent over the following two years."
Ultra-low interest rates have led some lenders to offer introductory home loan variable rates of 1.99 per cent, a move which follows the launch of the first fixed rate of less than 2 per cent.
"What this all means is now is the time to buy if you are a first home buyer or an owner-occupier who see Perth as your home, as this current slowdown in the property market is only temporary, with houses in popular areas likely to experience capital growth in the medium to long term. However, it must be stressed that units carry a higher risk and at this point of time so this strategy should only be considered for houses.
NOTE: Our calculations of the rental cost is based on the median house price in each area, multiplied by the rental return (i.e. yield), in %. The calculation of the mortgage repayments is based on 80% LVR (i.e. 20% deposit) of the median price in each area. The interest rates are based on the actual variable interest rates for owner occupiers and investors, as published by the EBA, and as follows:
Homebuyers: 2.92% for all loans
Investors: interest only: 3.17% and principal and interest: 2.96%