Despite the intense focus on rising house prices and stagnant wage growth among politicians and media outlets, the struggle for first home buyers trying to enter the Australian property market has continued - but it seems many may be finding a solution in ‘rentvesting’.
With property in desirable inner city suburbs proving increasingly out of reach, many young buyers are opting to rentvest by buying in more affordable areas while continuing to rent in their preferred location.
In fact, a recent analysis by Mozo found that rentvesting now accounts for over 30% of all property investments in Australia - or roughly $200 billion worth of loans.
“The Australian housing market has undergone a period of dramatic change. Youngpeople are finding it increasingly unattainable to purchase their own home in the city they live in,” said Mozo Property Expert Steve Jovcevski.
“Ease of transportation, minimal commute, greater job opportunities and stellar education, healthcare and culture are just a few reasons people are having their cake and eating it too. They can enjoy the benefits of a big city while making savvy property investments that won’t break the bank.”
As part of the analysis, Mozo looked at a number of factors including vacancy rates, property price movement and house supply across Australia to find the top rentvesting suburbs in each state with a median house price below $600,000.
From a median house price of just $324,000 in the suburb of Trevallyn just outside Launceston, to $580,000 for a median house in the northern Perth suburb of Madeley, the analysis found a range of potential options for rentvestors.
However, Jovceski warned young buyers thinking about rentvesting to take the emotion out of any decision by doing their research and focusing on the numbers.
“When looking for an investment property, there are a few key factors to assess. Vacancy rates will provide you with an idea of rental demand. The lower, the better. Be sure to crunch the numbers on your mortgage versus the rental returns in the suburb you are looking to invest in, as ideally, the rent will cover the majority of the Mortgage,” he said.
Are you thinking about the possibility of rentvesting? Make sure you check out our range of first home buyer guides for advice, and head over to the Mozo home loan comparison hub to compare the top home loan rates on the market.
Top 7 rentvestment suburbs under $600,000
Read on below for the seven hottest rentvesting suburbs, the median house price in that suburb and the monthly repayment cost if you were to purchase a property (based on a 30 year loan with a 20% deposit using the current average principal and interest investor rate in the Mozo database of 4.87%).
1. Trevallyn - Tasmania
- Median house price: $324,000
- Deposit required: $64,800
- Monthly mortgage repayment: $1,370
With a vacancy rate of just 1%, Trevallyn was our experts top pick in Tasmania. 3km from Launceston, the suburb is also close to Invermay (where The University of Tasmania is set to be relocated) which could drive rental demand from students in the future.
2. Sunbury - Victoria
- Median house price: $418,000
- Deposit required: $83,600
- Monthly repayment: $1,769
40km from Melbourne’s CBD and 20 minutes from the airport, Mozo’s experts predict a continued rise in prices in Sunbury over the next year thanks to a 47% drop in housing supply in the suburb and it’s appeal to first home buyers.
3. Liverpool - New South Wales
- Median unit price: $448,000
- Deposit required: $89,600
- Monthly repayment: $1,896
The affordability of units made the Sydney suburb of Liverpool top choice in New South Wales for our experts. Close to the M5 and public transport, Liverpool will also be down the road from future site of Sydney’s second airport at Badgerys Creek.
4. Brooklyn Park - South Australia
- Median house price: $504,000
- Deposit required: $100,800
- Monthly repayment: $2,133
Located between the beach, CBD and Adelaide airport, the Mozo experts predict a rise in Brooklyn Park’s future value given its low vacancy rates (1.2%) and the recent price growth in nearby suburbs.
5. Tewantin - Queensland
- Median house price: $517,000
- Deposit required: $103,400
- Monthly repayment: $2,188
Located just 10 minutes from tourist hotspot Noosa, Tewantin was considered a prime investment location in Queensland especially considering its recent drop in housing stock (down 31%) and vacancy rates (down to 1.2%).
6. Scullin - ACT
- Median house price: $540,000
- Deposit required: $108,000
- Monthly repayment: $2,285
Its proximity to Canberra’s CBD and the University of Canberra, plus a relatively low median price and vacancy rate of just 0.7% meant Scullin impressed our experts as a high value for money option in the nation’s capital.
7. Madeley - Western Australia
- Median house price: $580,000
- Deposit required: $116,000
- Monthly repayment: $2,454
20km north of Perth’s CBD and close to the beach, the Mozo experts thought Madeley presented the best value for investors in Western Australia, especially with it’s low vacancy rate of 1.1%.