There is no ‘one size fits all’ when deciding to purchase your first home and repay your own mortgage rather than continuing to rent and repaying someone else’s mortgage.
With the past few years of increased property values combined with rising interest rates, purchasing property has become less attractive for those wanting to enter the market.
Only 12 months ago, when interest rates were at their all time low, we reported that over a third of Australian properties were cheaper to own than rent*.
But according to PropTrack Buy or Rent Report [June 2022] only 27% of dwellings across Australia are currently cheaper to own than rent.
What a turnaround in such a short time!
So it appears that rentvesting may come back as a popular incentive for first home buyers who still want to
get into the property market but don’t want to give up their lifestyle of living and partying where they want.
Rentvesting
Rentvesting as an investment strategy in property is gaining popularity in Australia*. It refers to a strategy
where an individual buys a property that fits their budget and rents it out while they rent somewhere else that may better suit their lifestyle.
Figures from the Australian Bureau of Statistics (ABS) indicate that up to 15% of all of Australia’s private tenant households are rentvestors. This percentage represents approximately 340,000 Australians.
This strategy seems to be more popular with younger investors and appeals to those who are still single and
want to engage in the property market.
Pros of rentvesting vs home ownership
• Rentvestors could enter the market sooner with relatively smaller savings. Rentvesting targets lower-
value areas that may require a smaller deposit
• You could afford to live in a better property or area than you can afford to buy
• Provides flexibility for movement in jobs and location. You don’t have to pay for selling costs and stamp duty each time you move
• While saving a larger deposit for your home, you’re also entering the property market at today’s value.
Cons of rentvesting vs home ownership
• You may miss out on the First Home Buyer Government incentives.
• Limited freedom to change aesthetics or decorating where you are renting
• Less certainty. The landlord’s circumstances may change and affect your tenancy. The rent may increase
or the lease may come to an end
Sources
1 PropTrack Buy or Rent Report [June 2022]
2 corelogic.com.au/news/mortgage-serviceability-cheaper-renting-over-third-australian-properties
Disclaimer: The Information is general in nature and does not take into account your particular investment objectives or financial situation. It does not constitute, and should not be relied on as financial, investment or tax advice or recommendations (expressed or implied) and is not an invitation to take up securities or other financial products or services. No decision should be made on the basis of the information without first seeking expert financial or taxation advice. Your full financial needs and requirements would need to be assessed prior to any offer or acceptance of a loan product. Subject to lenders’ terms and conditions, fees and charges and eligibility criteria apply.
Comentarios