There is a lot of talk in the market of first home buyers struggling to get their foot in and purchase their first home. For some, this is a nationally crisis and an eroding of the Australian dream of home ownership, for others, this is a time of opportunity to make the most of a rapidly rising market. Rentvesting is growing amongst young people who are purchasing properties, not to live in but instead to invest in while they live in a rented property in a location of their choosing.
Research on behalf of Westpac and Herron Todd White has shown, Rentvestors are now making up around 3% of first home buyers nationally. Furthermore, up to 13% of young people are choosing to stay in the family home while purchasing an investment property with this figure being even higher in the more expensive state capitals in NSW and Victoria at 24% and 20% respectively.
Where does this leave the great Australian dream of home ownership? Research from the Commonwealth Bank of Australia has revealed that less than half of respondents (48%) feel that this dream is alive and well meaning the other half are seeing a shift in how Australians purchase their first home.
Michael Yardney of Metropole property, wrote on his PropertyUpdate blog stating that the Rentvesting strategy enabled young people to purchase property in a market that would have otherwise left them out in the cold.
“Rentvesting is a smart property acquisition strategy that’s giving potential first-home buyers the opportunity to buy sooner rather than later,” He said. “It’s a lifeline for those who are trying to gain a foothold in a property market that’s essentially a moving target – that is, growing in value faster than many home buyers can save a deposit.” Yardney has identified this rising trend as a paradigm shift, indicating that young people are now taking note of the changing dynamics of the Australian property market and rather than taking it on the chin and falling in line, they are taking advantage of the conditions and developing wealth building strategies which are suited to their lifestyles.
Yardney further went on to say that the strategy is beneficial in that it overcomes many of the financial obstacles resulting from rapidly rising property prices because rentvestors are able to capitalise on high growth suburbs which are suited for their budget yet they don’t have to compromise their lifestyle by living in a home backed by a mortgage.
“It works because even though you’re renting, the property you buy is an asset that’s growing in value, assuming you choose a smart location, and are being paid off by your tenant.
Not only that, but you’re gaining equity that can launch you into other property purchases down the track, including (when the time is right) a home to call your own,” What Yardney is saying here is that the property you purchase as part of your investment strategy would have vastly different characteristics than the home you would purchase as part of your principal place of residence meaning you are able to take advantage of high growth without overpaying in monthly mortgage payments.
The Australian Dream we grew up with since the 1940s might be fading as housing prices grow out of reach for many first home buyers but this isn’t to say it is experiencing a death, rather it is now coming of age it a vastly different market changing the way we view property ownership and investment, particularly for the younger generations.