According to new research from Westpac, rentvesting has become the new trend for young Aussies when it comes to getting into the property market.
‘Rentvesting’ involves purchasing a home in an affordable area, while continuing to rent in an area they wish to live in.
The method has been described by Westpac as “an alternative pathway to homeownership” and with the rising struggle of housing affordability, the number of young rentvesters will only continue to rise.
Since 2008, property prices around the country have drastically increased, with Sydney seeing the biggest jump by 106%, followed by 89% in Melbourne, 38% in Canberra, 17% in Adelaide and 16% in Brisbane. Sydney and Melbourne are currently among the most expensive cities for property prices in the world according to the RBA.
“The research shows that many young Australians are looking at savvy ways to get into the property market, showing that there’s still clear aspiration for home ownership whilst maintaining their lifestyle, said Lauren Fine, Head of Westpac Home Ownership.
Westpac identified that the typical rentvestor profile is male, born between 1983 to 1997, living in metro areas.
The survey also found that 2 out 5 Australians would be open to rentvesting, with Sydneysiders being the most likely to adopt it.
Currently, 61% of people rentvesting own a freestanding home, while 25% own an apartment or are rentvesting while living with their parents.
“Those rentvesting are most likely to have purchased their property in the last two years, which aligns with the increase we’ve seen in property prices across many areas of Australia. This may suggest first home buyers have responded to these increases by purchasing in more affordable areas, while continuing to rent where they currently live,” Fine explained.
If you are considering rentvesting as an option, Mozo’s Home Loan Expert, Steve Jovcevski says, there are a number of things you’ll need to consider:
- Deposit: Unlike owner occupier home loans, where you may only need a 5% deposit, you’re going to need a 20% deposit or assistance from a guarantor to fund an investment property purchase
- Take the time to research potential areas you can afford now and are willing to live in if needed in the future.
- Stamp Duty: You won’t get Stamp Duty concessions if you’re buying an investment property, so you’ll need to factor in this upfront cost when buying the property, which can be in the tens of thousands depending on the property.
- Interest Rates: Interest rates for Investment Loans are generally higher than for a property you plan to live in, so ensure you will be able to cover your mortgage repayments as well as your current rent and luxury expenses.
If you’re thinking about getting into rentvesting, check out today’s offers on home loans to find the right one for you.