In a tight rental market, investor home loans could be the buyer’s way in

Look, it’s no secret that renters are doing it tough. The average rent in Australia has catapulted to just shy of $600 a week. (In cities like Sydney, it’s more like $750). 

Sky-high rental values can make it tough to save for crucial home loan costs like that first deposit, especially when steep interest rates have already raised the affordability floor. 

National vacancies also dropped to just 1.1% in January 2024, according to SQM Research. So not only is renting colossally expensive in Australia’s capital cities, but there’s nowhere to rent.

However, there could be a hidden opportunity. While first home buyer grants can help Australians get on the property ladder, your first property doesn’t need to be your first home. In a tight rental market, the property investor is king.

Generally speaking, more properties have gone up for sale in the last year than during the 2022 housing downturn. 

More properties mean more opportunities for investors, and with rents rising, the potential rental income and tax breaks are a huge draw for landlords. 

“The return landlords are getting on their investment is improving,” explains Mozo property expert Peter Marshall. 

“There are just more opportunities for investors right now.”

Easter selling season is coming up, too – autumn and spring tend to be Australia’s busiest property moments. 

But despite this increase in investor opportunities, rentvesting is still a relatively small part of the property market. Could future home buyers be missing out?

Marshall points to the Bank of Mum & Dad and first home buyer grants as common ways to get home-buying assistance. However, investing in property and generating considerable home equity to borrow against later is an underrated way into the housing market. 

“Buyers may have maxed out the inner cities, but remote work means Australians no longer have to live in the city,” explains Marshall. 

“Home buyers can look further afield to where things are more affordable. And out there, they can get an investment property, rent it out, and generate income to pay the investor home loan.

“It’s a way of putting your nest egg into the property market and building up wealth to use later. Then, when it comes time to buy your dream home, you have equity or capital gains to help you make that purchase.”

Investing isn’t foolproof. You’re still liable for capital gains tax, mortgage repayments, and landlord maintenance costs like repairs. 

Investment home loan interest rates also tend to be higher than owner-occupied rates, since mortgage lenders see investors as financially risky.

However, property affordability ultimately boils down to purchase price, and there are still plenty of suburbs in Australia where you can buy houses for under $300,000. Any of these could be a future opportunity for a home buyer – and a future home for a renter. 

Compare investment home loans in the table below.