One way to determine affordability is to look at the difference between renting and buying a property. A common measure throughout the world is to use the House Price vs Rent Ratio.
Just like analysing a business of a company share price, the House Price vs Rent Ratio can help give a property buyer a measure as to whether they should buy a certain property or not.
We’ve looked at some of the key inner city areas, and the ratios that exist in each of those suburbs. The data in the table to the right has been gathered from the 1st of April to the 31st of July, a third of the year 2012. Interesting findings are below…
- Lowest Average Price: Kensington at $693,885
- Highest Average Price: Hawthorn at $1,582,833
- Lowest Average Annual Rent: Kensington at $25,351.13
- Highest Average Annual Rent: Middle Park at $38,640.64
- Lowest Ratio: Brunswick East at 25.08
- Highest Ratio: Hawthorn at 45.45
- Despite having the lowest Rent and Prices, Kensington does not appear to be the lowest ratio.
A Rent vs Buy ratio of over 31 is really making renting more favourable overall.