Young buyers prefer rentvesting to get into housing market

RENT where you want to live, buy where you can afford ? that’s the philosophy expected to guide more young property buyers through the housing market. A new report has tipped the trend of “rentvesting” ? where people buy investment properties in cheaper locations and rent homes elsewhere ? to grow as home prices climb further.

The Westpac research showed rentvestors have already become a large, yet distinct category of property buyers, especially in Sydney. Their emergence, first observed as a major trend by property group LJ Hooker in 2013, has followed a 106 per cent increase in Sydney’s median house price over the past nine years.

Lauren Fine, head of home ownership at Westpac, said rentvesting was a direct response to the runaway growth in home prices. The strategy would become more popular because it allowed buyers to get into the housing market without sacrificing their lifestyle to meet their mortgage repayments, she said.

“Many young Australians are looking at savvy ways to get into the property market, showing that there’s still clear aspiration for home ownership while maintaining their lifestyle,” Ms Fine said.

Rentvesting has struck a particularly strong chord with young men, according to the Westpac research. Close to 65 per cent of those adopting the strategy were men and 61 per cent were below the age of 35. Close to half were single. Young men often opted to rentvest because of its greater flexibility, Ms Fine said.

“Rentvesting presents choice and flexibility, whether these homeowners live with parents or rent in a location that’s suitable to them, their needs and lifestyle,” she said. “From our research we can tell men ? not just those who are rentvesting ? are often more open to having a diversified investment plan. “Another consideration could be, on average in Australia, men earn 16 per cent more than women, meaning that their single income could go that little bit further in saving for a home.”

Arncliffe renter Ali Taoube, 31, who signed contracts on an investment property in Bexley a week ago, said rentvesting gave him more “options” than he would have had as an owner-occupier.

“I didn’t want to buy a really small unit or live far out west because that was all I could afford if I didn’t have rent to help pay my mortgage,” Mr Taoube said. Current sales and rental listings provide further insights into why rentvesting has become so popular. Renting a two-bedroom unit in a popular lifestyle suburb such as Mosman typically costs about $600 per week. This is substantially lower than the circa $1050 in weekly mortgage repayments one would have to stump up each month if paying the $1 million that two-bedroom Mosman units usually cost. A budget of just $450,000, meanwhile, can bag buyers three-bedroom units in Penrith with rents of about $350 per week.

Daily Telegraph /August 4, 2017

newsletter