Due to high housing affordability levels, the current generation of new home buyers is finding it increasingly challenging to purchase property where they wish to live. So a new trend has emerged to get a foot hold into the property market – by buying an investment property in an area where you can afford while continuing to rent in the area you wish to live. This relatively new strategy is called – rentvesting.
Like any new strategy that may or may not have an effect on housing affordability, rentvesting has its supporters and its critics. The rentvesting supporters are behind the fact that this is one strategy where you get into the property market while taking advantage in some cases of tax breaks and negative gearing.
While on the other hand, there are others that suggest that rentvesting is adding to the landlord culture across our major cities and pushing the affordability problem onto future generations, but if you can’t afford to buy where you wish to live – it’s easy to see why this is becoming a more and more popular trend.
Who is rentvesting?
A typical rentvestor is most likely to be a single male aged between 20 to 34, with a high income who is less emotional about owning property – suggests new research from Westpac. Many rentvestors purchased their property in the last two years and it is estimated they already make up about 8 per cent of homeowners.
Rentvestors are preferring to invest in the traditional freestanding house, with 61 percent preferring this option over apartments (25 per cent) and a townhouse or duplex (19 per cent).
“We know the trend of rentvesting is growing, with 41 per cent of all Australians surveyed believing it’s better to buy an investment property in a more affordable area and rent a house in an area you really want to live in,” said Westpac head of home ownership Lauren Fine.
Interestingly, as this is a first step strategy into the property market, the great Australian dream of owning your own home for rentvestors remains strong as Lauren explains, “The majority of this group (77 per cent) are looking to buy a house or apartment to live in as their next property, indicating that being an owner-occupier remains an aspiration”.