The "renting is dead money" line is one of the most repeated statements in Australian personal finance — and one of the least examined. In year one of buying, almost everyone who runs the numbers honestly finds that renting is, financially, the cheaper option. The genuine question is not "is rent dead money?" but "after how many years does buying overtake renting, given the rate I'm paying, the home I'm buying, and what I'd otherwise do with the deposit?".
This guide walks through the 2026 figures — current loan rates, capital growth, rents, and stamp duty — and shows how to model the decision properly with the Calcula rent vs buy calculator.
The headline 2026 numbers
Five figures shape almost every rent vs buy calculation in Australia in 2026:
| Figure | Value | Source |
|---|---|---|
| RBA cash rate | 4.35% (raised 5 May 2026) | RBA cash rate target |
| Average new variable home loan rate | 5.66% p.a. | RBA Table F6 |
| National median dwelling value | $933,137 | Cotality HVI April 2026 |
| National rent inflation (12 months) | +5.7% | Cotality |
| ASX 200 10-year annualised total return | 9.57% p.a. | Betashares A200 |
The RBA lifted the cash rate to 4.35% in early May 2026, the third hike of the year. New variable owner-occupier loans are averaging 5.66% per annum. National property values rose 9.9% in the year to March 2026, but the headline figure hides a wide capital-by-capital spread that matters enormously for the rent vs buy decision.
Why renting almost always wins year one
Take a $1,000,000 owner-occupier purchase in Sydney with a 20% deposit and 80% mortgage:
Cost of buying in year one (Sydney, $1m home): Interest at 5.66% on $800,000 loan: ~$45,300 Council rates, water, insurance, maintenance (~1.4% of value): ~$13,700 Total annual running cost: ~$59,000
Compare that to a renter living in the same property:
Cost of renting in year one (Sydney, equivalent property): Median Sydney house rent: $800/week (Domain, March 2026) = ~$41,600/year
The renter is roughly $17,400 better off in year one, and that's before counting the buyer's upfront costs:
- Stamp duty on a $1m NSW purchase (non-FHB): $39,412 (Revenue NSW)
- Conveyancing, building/pest inspections, lender fees: ~$3,000–$5,000
- Loan establishment fees, possibly LMI: $0–$25,000+
If the buyer also has to pay LMI because their deposit is below 20%, total upfront transaction costs in Sydney commonly run $45,000–$75,000 — equivalent to roughly one to two years of Sydney median rent before they own anything more than a deposit.
So why does anyone buy?
Three reasons that renting cannot match:
- Leverage on capital growth. A buyer with a $200,000 deposit and an $800,000 loan controls a $1,000,000 asset. If that asset grows 5% in a year, the buyer's equity grows by $50,000 — a 25% return on the deposit. The renter's $200,000 in an index fund growing at 9.57% returns $19,140. Property's leverage is the single biggest reason it can outperform shares over long periods despite a lower underlying growth rate.
- Forced saving. Each principal-and-interest repayment converts cash into home equity. Most Australians find it psychologically easier to "pay the mortgage" than to "invest the same amount each month".
- Security of tenure. A mortgage holder cannot be served notice to leave because the landlord wants to sell. In a market where rents rose 5.6% in the past year and Sydney's vacancy rate sits at 0.8%, that security has a real, if hard-to-price, value.
The five-year capital-growth picture
The "is it worth buying?" question depends massively on which capital you're in. Cotality's annualised dwelling value growth over the five years to March 2026:
| Capital | 5-yr annualised growth | Median value (Mar 2026) |
|---|---|---|
| Perth | 13.8% p.a. | $1,017,698 |
| Brisbane | 13.1% p.a. | $1,101,151 |
| Adelaide | 12.3% p.a. | $937,021 |
| Darwin | 6.3% p.a. | $618,596 |
| Sydney | 4.6% p.a. | $1,295,387 |
| Hobart | 4.2% p.a. | $737,742 |
| Canberra | 4.1% p.a. | $892,800 |
| Melbourne | 1.6% p.a. | $828,249 |
A Melbourne buyer's home grew 1.6% per annum over the past five years. Over the same period, the ASX 200 returned 9.57% per annum including dividends. That gap — about 8 percentage points a year — is the kind of headwind that even a 5× leveraged property struggles to overcome.
Three worked scenarios
The simplest way to make this concrete is to look at three buyers, all over a ten-year hold.
Scenario 1 — Sydney, $1m purchase, 20% deposit
- Year-one cost gap (buy vs rent): ~$17,400 favouring the renter
- Stamp duty + transaction costs: ~$45,000
- 10-year capital growth at 4.6% p.a.: home worth $1,565,000
- Equity gained from growth: $565,000
- 10-year compounded ASX return on $200k deposit at 9.57%: $499,000 (foregone)
The Sydney buyer's leveraged capital growth ($565k) marginally beats the renter's invested deposit ($499k), but the running cost gap and stamp duty mostly absorb the difference. The two paths are roughly even on a 10-year horizon — meaning the right choice in Sydney comes down to non-financial factors like wanting to renovate, having children, or stable employment in one location.
Scenario 2 — Perth, $1m purchase, 20% deposit
- Year-one cost gap (buy vs rent): ~$13,000 favouring the renter (Perth rent is $740/week)
- Stamp duty + transaction costs: ~$48,000 (WA schedule)
- 10-year capital growth at 13.8% p.a. compounded: home worth $3,640,000
- Equity gained from growth: $2,640,000
- 10-year compounded ASX return on $200k deposit: $499,000
Perth's recent capital growth has been so strong that even after running cost gaps and stamp duty, buying clearly wins on a 10-year hold. The risk is mean reversion — Perth has had property booms before that did not continue. Calcula uses the long-run national growth rate (3-4% p.a.) as the conservative default in the rent vs buy calculator for that reason.
Scenario 3 — Melbourne, $828k purchase, 20% deposit
- Year-one cost gap: ~$10,500 favouring the renter (Melbourne house rent ~$590/week)
- Stamp duty + transaction costs (VIC): ~$45,000
- 10-year capital growth at 1.6% p.a.: home worth $971,000 (gain $143,000)
- 10-year ASX return on $166k deposit: $413,000 (foregone)
If recent growth rates persist, the Melbourne buyer is materially worse off than the disciplined renter — to the tune of around $300,000 over ten years. Melbourne is the clearest current example of a market where renting and investing the difference would have outperformed buying historically. Whether that pattern continues depends on whether Melbourne's growth reverts to its longer-term ~5% p.a. average or stays subdued.
The opportunity cost almost everyone forgets
The phrase "rent money is dead money" is misleading because it ignores what happens to the money you would have used as a deposit. A renter who saves their would-be deposit and invests it earns a return on that capital. A buyer ties the same capital up in a property where it earns the property's total return less holding costs and interest.
At a 9.57% per annum 10-year ASX return, $200,000 compounds to $499,000 in ten years. To beat that on the deposit alone, the property's leveraged return on equity has to exceed roughly 9.6% per annum — which is achievable in fast-growing capitals but well above the 4-5% per annum that Sydney and Melbourne have delivered recently.
The honest framing isn't "rent vs own" — it's:
Buying = leveraged property exposure + housing security + tax-free capital gain on PPOR vs Renting = liquid investment portfolio + flexibility to move + no transaction costs
Both are valid; neither is universally better.
What the 2026 federal budget might change
The 12 May 2026 federal budget is widely expected to announce two structural reforms (CBA preview, The Guardian, 1 May 2026):
- Negative gearing limited to new investments only, with grandfathering for existing portfolios.
- The 50% CGT discount replaced by inflation indexation (similar to the pre-1999 system).
If passed, modelling broadly suggests house prices may fall 3-6% as some investors exit, but rents may rise as rental supply tightens. The arithmetic for first home buyers therefore gets slightly better on entry price and slightly worse on rent if they remain in the rental market longer.
Note: at the time of writing (5 May 2026) these changes are announced expectations, not legislation. Calcula will update this article once the rules are confirmed.
How to actually run the maths
The numbers above use a single set of assumptions. Your situation will differ on a few key levers:
- Your loan rate — shop around. The gap between the cheapest and average new variable rate in May 2026 is roughly 30 basis points, or ~$2,400 a year on an $800,000 loan.
- Your deposit and LMI — a 10% deposit in Sydney typically costs $20,000+ in LMI, which adds 2-3 years to the buy-vs-rent break-even.
- Capital growth assumption — using the long-run national average (3-4% p.a.) is more conservative than the recent 5-year figure for Perth or Brisbane and more generous than the 5-year figure for Melbourne.
- Investment return on the renter's deposit — most rent vs buy calculators silently assume 0%. Calcula's calculator lets you set this explicitly.
- Holding period — anything under 5 years almost always favours renting because of stamp duty amortisation. Anything over 15 years usually favours buying in capital cities.
The fastest way to test your own numbers is to plug them into the Calcula rent vs buy calculator, which compares the cumulative cost of buying (mortgage, holding, stamp duty) against the cumulative cost of renting plus a separately-invested deposit.
If you want to think about it from the loan-affordability side first, the mortgage calculator shows the monthly repayment at a given rate, and the stamp duty calculator handles the upfront cost across all eight states and territories.
A short reminder on advice
This article works through the maths of an average Australian property purchase in 2026. It is general information only — not financial advice, not advice for your specific situation, and not a recommendation to buy or rent. Your decision should also factor in things this article cannot model: how stable your job is, whether you want to renovate, whether you have or want children, and how much weight you place on being able to move easily.
Before signing a contract or a lease, speak to a licensed financial adviser, accountant or mortgage broker about your circumstances.
Authoritative sources: Reserve Bank of Australia, Cotality (CoreLogic) Home Value Index, Domain Rental Report, Revenue NSW transfer duty.