Buy vs rent in 2026: when buying builds more wealth than renting

The decision to buy a home rather than rent has never been purely financial. But in 2026, with the RBA cash rate at 4.35%, the cheapest variable mortgage rates hovering around 5.69%, and the First Home Buyer Guarantee (FHBG) offering a 5% deposit with no income cap from July 2026, the numbers warrant a close look.

This article models a 30‑year scenario comparing renting at $650 per week against buying a property with a $700,000 mortgage. The break‑even point depends almost entirely on three variables: capital growth, stamp duty and purchase costs, and the opportunity cost of your deposit.

The 30‑year model: setting the scene

We assume a typical first‑home buyer in Sydney or Melbourne in mid‑2026. The purchase price is $750,000. The buyer uses a 5% deposit ($37,500) plus the FHBG, avoiding Lender’s Mortgage Insurance (LMI). They take a 30‑year principal‑and‑interest loan at 5.69% with a $700,000 mortgage (the remaining balance after deposit).

· Monthly repayment on a $700,000 loan at 5.69% p.a. (30 years) ≈ $4,042 per month. · Stamp duty in NSW on a $750,000 home (with first‑home buyer concessions) ≈ $19,000 (assuming full concession eligibility; otherwise about $30,000). · Other purchase costs (conveyancing, inspections, registration) ≈ $5,000. · Total upfront cost to buy: deposit ($37,500) + stamp duty ($19,000) + other costs ($5,000) = $61,500.

The renter pays $650 per week ($2,817 per month) and invests the deposit and purchase costs ($61,500) in a diversified portfolio earning 7% per annum (historical share market return). Rent is assumed to increase at 3% per year (long‑term average).

Both households have the same net disposable income after housing costs and investment returns are compared after 30 years.

Rent at $650/week vs a $700k mortgage: the numbers

Using a net‑worth accumulation model (including property equity, investment growth, and ongoing costs such as rates, insurance, maintenance at 1% of property value annually), we compare outcomes at a 3% annual capital growth rate (moderate by Australian historical standards).

Scenario: 3% capital growth per year

· Property value after 30 years: $750,000 × (1.03)^30 = $1,820,000. · Remaining mortgage after 30 years: $0 (fully paid). · Net equity in home: $1,820,000 minus selling costs (say 3% = $54,600) = $1,765,400. · Renter’s portfolio after 30 years: Starting investment $61,500, monthly contributions of ($4,042 – $2,817) = $1,225 per month (the difference between mortgage and rent), invested at 7% p.a., grows to approximately $1,840,000 (using future value of an annuity formula). · Plus renter also saves the stamp duty and purchase costs that the buyer paid upfront? No – the renter invested those. So renter net worth = $1,840,000. · Buyer net worth = $1,765,400.

At 3% capital growth, the renter comes out slightly ahead by about $75,000.

How capital growth shifts the break‑even point

The break‑even capital growth rate—where buyer and renter end with identical net worth—is roughly 3.6% per annum. Below that, renting wins. Above that, buying wins.

· At 2% growth: Buyer equity ≈ $1,353,000; Renter ≈ $1,840,000 → renting is better. · At 4% growth: Buyer equity ≈ $2,424,000; Renter ≈ $1,840,000 → buying is better. · At 5% growth: Buyer equity ≈ $3,240,000; Renter ≈ $1,840,000 → buying dominates.

Australian residential property has historically averaged about 5–6% annual growth over the long term, but recent decades include periods of 10%+ and 0%. Use 3% for a conservative estimate; 4–5% for a balanced forecast.

The role of stamp duty and purchase costs

Stamp duty is the single biggest one‑off cost that tilts the buy‑vs‑rent equation. In 2026, state governments continue to offer generous concessions to first‑home buyers, but eligibility and thresholds vary.

· NSW: Full stamp duty exemption on properties up to $1,000,000 (reduced rate up to $1,200,000). A $750,000 purchase results in zero stamp duty for eligible first‑home buyers. · Victoria: First‑home buyer exemption up to $600,000 (concessional up to $750,000). A $750,000 home in Victoria would pay about $17,000 in duty. · Queensland: Exemption up to $500,000; concessional up to $550,000. · Western Australia: Exemption up to $430,000; reduced rate up to $530,000.

Even with concessions, stamp duty can be $0 to $30,000. In our model, a $19,000 stamp duty adds 30% to the upfront cost of buying, and that money ($19,000) could instead be invested for 30 years at 7% returning over $140,000. That’s a significant head start for renters.

The other purchase costs (conveyancing, building & pest inspections, registration, lender fees) typically total $3,000–$5,000. While smaller, they compound in the same way.

For a full breakdown, see our guide to stamp duty in 2026 by state and the hidden costs of buying a home.

Federal and state policy impacts in 2026

Several policy changes in 2026 directly affect the buy‑vs‑rent calculation.

First Home Buyer Guarantee (FHBG)

From July 2026, the FHBG no longer has an income cap. Any Australian citizen or permanent resident who has not owned a home in the previous 10 years can purchase with a 5% deposit and LMI waiving. Price caps per city: Sydney $1.5M, Melbourne $950K, Brisbane $1M, Perth $850K.

This allows a buyer to enter the market with as little as $37,500 on a $750,000 home (as in our model). Without the FHBG, a typical 20% deposit of $150,000 would be needed, radically changing the comparison because the renter would invest that $150,000 instead.

APRA macroprudential settings

APRA maintains its 3% serviceability buffer and a debt‑to‑income (DTI) cap of 6 times income from February 2026. This means a borrower earning $100,000 per year cannot take a mortgage larger than $600,000, barring a few exceptions. Our $700,000 loan would require an income of at least $117,000 to satisfy the DTI cap, or a much lower loan amount if using the FHBG with a higher income.

The 3% buffer means a borrower at 5.69% must be able to service a loan at 8.69%. This effectively limits borrowing capacity and can push some buyers into renting for longer.

RBA cash rate at 4.35%

The RBA’s cash rate remains unchanged since late 2025. Variable mortgage rates are around 5.69%, but many fixed‑rate offerings from 2021–2023 are rolling off. Homeowners refinancing from 2% to 5.69% face significant payment shock. For new buyers, the higher rates reduce borrowing power but also slow capital growth.

When buying builds more wealth: scenarios

· High capital growth area: Buying in a location with strong infrastructure investment, population growth, or supply constraints can deliver 5%+ annual growth. Over 30 years, a $750,000 property becomes $3.24M. Even after costs, the buyer’s net worth far exceeds the renter’s.

· Long holding period: Stamp duty becomes less significant when amortised over 30 years. If you plan to stay put for at least 10–15 years, buying usually outperforms renting.

· Stable rental yield: Our model assumes rent rises 3% per year. But in high‑demand cities, rent growth often exceeds 4%, narrowing the gap between mortgage payment and rent quicker. If rents catch up faster, the renter’s saving advantage fades.

· Non‑financial benefits: Security, ability to modify the home, no landlord risk, and forced savings through mortgage pay‑down. These cannot be modelled but matter for many buyers.

When renting wins: scenarios

· Low capital growth (under 3.6%): Areas with poor growth prospects—oversupplied regions, declining industries, or expensive coastal towns with limited job growth—can lead to renting being the better financial decision.

· Short intended occupancy (under 7 years): Stamp duty and selling costs can consume the equity gained. A buyer who sells after 5 years may end up with far less net wealth than a renter who invested the difference.

· High‑cost mortgage but cheap rent: In our model, the mortgage is $4,042 vs rent $2,817 – a gap of $1,225 per month. In cities where the rent‑to‑mortgage gap is even wider (e.g., Perth 2026 where median rent is $550 vs mortgage on $850k property is $4,300), renting frees up significant cash to invest.

· Better investment returns: If the renter achieves 8–10% returns (e.g., the ASX200 total return over long periods is about 9–10%), the renter’s portfolio can easily outpace property equity.

· Rent‑vesting: Some renters choose to invest in property elsewhere (e.g., buy in a cheap city while renting in an expensive one). This hybrid model can perform well but introduces complexity.

FAQ

Q: How much deposit do I need to buy in 2026 without LMI?

A: Using the First Home Buyer Guarantee (FHBG), you need a 5% deposit on properties up to the price caps: Sydney $1.5M, Melbourne $950K, Brisbane $1M, Perth $850K. No income cap applies from July 2026. For a $750,000 property, the deposit is $37,500. Without the FHBG, a 20% deposit of $150,000 is typical to avoid LMI.

Q: What happens if property prices fall in the first few years?

A: If you buy with a 5% deposit and property values drop by 10%, you are immediately in negative equity (loan $700k, property value $675k). You cannot sell without a financial loss. This risk is lower with a 20% deposit. Renters face no such risk.

Q: Does the break‑even capital growth rate change if I have a larger deposit?

A: Yes. A larger deposit reduces the mortgage amount (and thus the repayment gap) but increases the opportunity cost of the deposit money. For example, a 20% deposit of $150,000 results in a mortgage of $600,000. The monthly payment drops to about $3,464, narrowing the gap with rent. The break‑even growth rate might fall to 3.2% because less upfront cash is tied up.

Q: How does stamp duty affect the buy vs rent math in NSW for a $750k property in 2026?

A: Eligible first‑home buyers in NSW pay $0 stamp duty on a $750,000 purchase (full exemption up to $1M). That saves about $30,000 compared to a non‑eligible buyer. In our model, eliminating stamp duty reduces the buyer’s upfront cost by $19,000 (assuming the $19,000 was the concessional amount). That extra cash invested grows to around $140,000 over 30 years, making buying more attractive.

Q: What is the best strategy if I plan to move cities in 5 years?

A: Renting is generally better for a 5‑year horizon unless capital growth is very high (over 5% p.a.). With stamp duty and selling costs (about 3% of sale price), buying and selling within 5 years often results in a net loss even with moderate growth. A better approach: rent and invest the difference, or consider buying a property you can convert to an investment when you leave.

Sources

1. Reserve Bank of Australia – Current cash rate and monetary policy (2026). Link: rba.gov.au
2. Australian Prudential Regulation Authority – Macroprudential policy; serviceability buffer and DTI limits (Feb 2026). Link: apra.gov.au
3. Housing Australia – First Home Buyer Guarantee guidelines and price caps (Jul 2026). Link: housingaustralia.gov.au
4. State Revenue Office NSW – Stamp duty rates and first‑home buyer concessions (2025‑26). Link: revenue.nsw.gov.au
5. State Revenue Office Victoria – First‑home buyer duty exemptions and concession thresholds (2025‑26). Link: sro.vic.gov.au

CTA

Ready to run your own numbers? Use our interactive buy vs rent calculator to model your specific situation: deposit, property price, your rent, and interest rate. Adjust capital growth assumptions to see your break‑even point.

Or explore the stamp duty concession guides to estimate your true upfront costs.

Need a quick check? Open our data‑open‑widget to see how different capital growth rates change the outcome for a $700k mortgage vs $650/week rent. Click below to load the widget.