Buying vs Renting in Australia — When Does It Make Sense?

The Math: Rent vs Buy Comparison

Let's compare the real costs of renting vs buying a $600,000 property to see how the numbers stack up.

Stamp Duty by State

Stamp duty (transfer duty) is the biggest hidden cost of buying property. It's a state government tax that can add tens of thousands to your purchase price.

First Home Owner Grant (FHOG)

The FHOG is a one-off payment from your state government to help first home buyers. The amount and eligibility criteria vary by state:

• NSW: $10,000 for new homes up to $600,000
• VIC: $10,000 for new homes up to $750,000 (regional: up to $750,000)
• QLD: $30,000 for new homes up to $750,000
• WA: $10,000 for new homes up to $750,000
• SA: $15,000 for new homes up to $650,000
• TAS: $30,000 for new homes
• ACT: No FHOG, but stamp duty exemptions apply

The FHOG generally only applies to new homes or newly built properties, not established (existing) homes. You must live in the property for at least 6-12 months after purchase. Both Australian citizens and permanent residents are eligible.

Deposit Requirements & LMI

How much deposit do you actually need?

• 20% deposit — the ideal target. No Lenders Mortgage Insurance (LMI) required. On $600K, that's $120,000.
• 10% deposit — possible with most lenders, but you'll pay LMI. On $600K with 10% deposit, LMI might be $8,000-$15,000.
• 5% deposit — possible through government schemes (see below). LMI can be $15,000-$30,000, or waived through the First Home Guarantee.

Lenders Mortgage Insurance (LMI) protects the bank (not you) if you default. It's a one-off premium that can be added to your loan. The lower your deposit, the higher the LMI cost.

How Much Can You Borrow?

As a rough guide, most banks will lend you 5-6 times your annual household income, minus any existing debts. For example:

• $80,000 income: Can borrow approximately $400,000-$480,000
• $120,000 income: Can borrow approximately $600,000-$720,000
• $150,000 income (couple): Can borrow approximately $750,000-$900,000

Banks also consider your living expenses, existing debts (credit cards, car loans, HECS/HELP), and the number of dependents. Getting pre-approval before house hunting gives you a clear budget.

Pros of Buying

• Building equity — every mortgage payment builds your ownership stake. Over 25-30 years, you'll own the property outright.
• Stability — no landlord can evict you or raise the rent. Your mortgage payment is predictable (on a fixed rate) or changes slowly (on a variable rate).
• Capital growth — Australian property has historically grown at 5-7% per year long-term, though this isn't guaranteed.
• No inspections — you can renovate, paint, have pets, and make the space truly yours.
• Forced savings — a mortgage forces you to save through repayments, building wealth you might otherwise spend.

When Renting Is Smarter

Despite the cultural pressure to buy, renting is often the smarter financial choice in these situations:

• First 1-2 years in Australia — rent while you learn the city, understand suburbs, and figure out where you want to live long-term. Buying in the wrong area is an expensive mistake.
• Unstable employment — if your job isn't secure or you might need to relocate, a mortgage can trap you.
• Small deposit — buying with less than 10% deposit means paying thousands in LMI. It might be better to keep saving.
• Expensive market — in Sydney and Melbourne, where median prices exceed $1 million, renting can be significantly cheaper than mortgage payments.
• Investment strategy — some financial advisors argue you can get better returns by renting cheaply and investing the difference in shares or other assets ("rentvesting").

Government Schemes for First Home Buyers

The Australian Government offers several schemes to help first home buyers enter the market:

First Home Guarantee (formerly First Home Loan Deposit Scheme)

Allows you to buy with just a 5% deposit without paying LMI. The government guarantees the remaining 15% to the bank. You still need to repay the full loan, but you avoid the upfront LMI cost. Limited places available each financial year — apply through participating lenders.

Help to Buy Scheme

A shared equity scheme where the government contributes up to 40% of a new home's price (30% for existing homes). You buy with a smaller mortgage, and the government owns a share. When you sell, the government gets their percentage back. This scheme significantly reduces your mortgage repayments.

First Home Super Saver Scheme (FHSSS)

Allows you to save for a deposit inside your super fund, where contributions are taxed at 15% instead of your marginal rate. You can withdraw up to $50,000 of voluntary contributions to put toward your first home. This can save you thousands in tax while building your deposit faster.

Tips for First Home Buyers

1. Get pre-approved before looking. Know your budget before falling in love with a property you can't afford.
2. Factor in ALL costs. Stamp duty, LMI, legal fees, building inspections, moving costs, and furnishing can add $30,000-$50,000 on top of your deposit.
3. Don't max out your borrowing capacity. Just because a bank will lend you $700K doesn't mean you should borrow that much. Leave room for interest rate rises, job changes, and life expenses.
4. Get a building and pest inspection. Always, even for apartments. This costs $400-$600 but can save you from buying a property with major structural issues.
5. Compare mortgage rates. Don't just go with your bank. Use a mortgage broker (free for you — they're paid by the lender) to compare rates across 30+ lenders.
6. Consider off-the-plan cautiously. Buying a property before it's built can get you the FHOG and stamp duty savings, but there are risks if the developer goes bust or the final product differs from plans.
7. Check the strata/body corporate. For apartments, review the strata report for upcoming levies, building defects, and financial health of the owners' corporation.

Frequently Asked Questions

How much deposit do I need to buy a house in Australia?

Ideally 20% of the purchase price to avoid Lenders Mortgage Insurance (LMI). However, you can buy with as little as 5% through government schemes like the First Home Guarantee. On a $600,000 property, a 20% deposit is $120,000, while 5% is $30,000. With less than 20% deposit, expect to pay LMI of $8,000-$30,000 depending on your deposit size. Read our Rent Budget Guide if you're still renting.

What is stamp duty and how much does it cost?

Stamp duty (transfer duty) is a state government tax paid when you buy property. It varies by state and property value. On a $600,000 property, stamp duty ranges from about $15,000 in Queensland to $31,000 in Victoria. First home buyers may get reductions or exemptions depending on their state and purchase price.

What is the First Home Owner Grant?

The FHOG is a one-off payment from your state government. Amounts vary: $10,000 in NSW and VIC, $30,000 in QLD and TAS, $15,000 in SA. It usually only applies to new or newly built homes, not established properties. Both citizens and permanent residents are eligible.

Is it cheaper to rent or buy in Australia?

In the short term (1-3 years), renting is almost always cheaper when you factor in stamp duty, LMI, and maintenance. Over 7-10+ years, buying usually works out better because you build equity. The break-even point depends on your location and market conditions. Use our Cost of Living Calculator to compare.

Can I buy a house in Australia as a permanent resident?

Yes, permanent residents can buy property without restrictions. You don't need FIRB approval like temporary visa holders. You have the same rights as citizens when purchasing, including access to first home buyer grants and schemes.

Disclaimer: Property prices, stamp duty rates, and government schemes change regularly. The figures in this guide are approximate and based on 2025-26 data. Always get professional advice from a qualified mortgage broker, conveyancer, or financial advisor before making property decisions. SettleAU is not a licensed real estate agent or financial advisor.