The Property Market Cycle Is Different This Time and Rentvestors Have a Lot to Do with It

August 21, 2017

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The Property Market Cycle Is Different This Time and Rentvestors Have a Lot to Do with It
Posted on Monday, August 21st, 2017

Rentvestors are growing in numbers across our country with the latest data by Westpac showing that up to 40% of Australians would consider rentvesting as a strategy to get involved in the real estate market. With housing affordability being a major talking point in the latest market cycle, we need to ask the question, how does rentvesting affect our property markets?

Steve Waters of Smart Property Investment, wrote on the subject and identified three factors which he considers to be the defining factors in why our current market cycle is different the previous ones and rentvestors have their own role to play.

Firstly, Waters discusses the role technology has on our property markets. This has become a major element of the behavior of investors over the past decade and more so than ever. With social media and data on our property markets such as trends, locations, financials, becoming increasingly available, investors can make decisions much faster and easier than they have been in the past. This was one of the factors which gave birth to rentvestors. Young people are more tech savvy than previous generations and they have been able to use the availability of information to explore areas outside their own cities and states with a few clicks of a button.

Secondly, rentvestors are an interesting group as they don’t fall into a singular category. They are investors, renters and landlords meaning they often show up twice in different counts when determining data. There is no specific data for rentvestors despite a few bank initiated surveys. This means it can be difficult to determine the affect rentvestors have on the market with no specific category to define them, we aren’t able to see exactly what is happening and where. Waters used the example of first home buyer data to show the significance rentvestors have in the market.

“In established housing sales, first home buyer (FHB) owner-occupiers scored 18 per cent and first home buyer investors (or rentvesters) were 10.1 per cent, which means a total of 28.1 per cent of the market.

When it came to new property, FHB owner-occupiers accounted for 21.2 per cent of new property sales in the quarter and FHB investors bought 14.4 per cent – a total market share of 35.7 per cent, the biggest of such proportion since the survey started tracking FHB breakdown in 2014.”

As we can see from this data, rentvestors who are purchasing their first home are quite a large group and fast catching up to first home buyer owner occupiers. Waters asks the question “If they weren’t active, what would the market look like?”

Finally, it all comes down to affordability. Our market, particularly in the capital cities of Sydney and Melbourne are reaching the point where it is difficult for first home buyers to break into the market. For this reason, many have decided that they would rather rent in a location they feel is desirable while investing in locations elsewhere.

#Rethink #Reinvent #Rentvest

Peter Mastroianni
Peter Mastroianni is a property finance expert and the co-founder of Loans Only, specialising in investment lending. He is the author of two top-selling real estate books and host of The Rentvesting Podcast. Peter is passionate about supporting the next generation of investors rethink the traditional home ownership model. He does this by championing the ‘Rentvesting’ strategy through www.rentvesting.com.au.

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