- The number of properties that are cheaper to buy than rent has declined
- In some cases, mortgage repayments may risen more than rents
- Investors are encouraged to conduct their own research or seek professional advice
As Australia’s property market began to soar early in the pandemic, many were priced out of their desired markets, even their own cities. The concept of rentvesting began to gain traction, with the concept simply involving renting where you want to live and investing elsewhere.
As the property market cools and rental growth skyrockets, one may naturally wonder if the idea is still worth it’s salt.
Sydney-based buyers’ agent and Qualified Property Investor Adviser, Kate Hill, said contrary to appearances in a high rent environment, rentvesting is still worth a look, depending on age or location.
“Anyone who may be a bit younger, or who lives in an expensive city like Sydney or Melbourne, should still be considering rentvesting as a strategy given it generally remains cheaper to rent a house in our biggest cities than it is to buy one.”
Kate Hill, Property Buyer, Adviseable
“The truth of the matter is that mortgage repayments have risen more than rents have over the past year, which has actually reduced the number of suburbs where it is cheaper to buy than rent according to the latest research.”
Hill cited CoreLogic analysis, which found less than one in ten (9.1%) suburbs across Australia were cheaper to buy a house than rent, down from three in ten (30.2%) this time last year.
For the unit market, this time last year saw almost one in two (45.2%) units cheaper to buy than rent, with the latest figures showing less than one in five (16%) were cheaper to own.
“These sorts of market metrics highlight the fact that – whether you are a homeowner, investor, or tenant – we are all currently experiencing upward price pressures on our mortgage repayments or rents,” Hill said.
“The record low interest rates were always temporary, and today’s higher rate environment is on par with historical averages – it’s just reached the current level more quickly than most of us were expecting.”
Hill also observed improving market conditions, The Property Tribune has reported on several price indices that have seen upticks in home values over the past few months.
“Rentvesting has always been a solid strategy for anyone who is keen to invest in property but who doesn’t want to have to sacrifice their lifestyle or location to achieve it,” she said.
“The rentvesting strategy generally suits property buyers who want to remain renting in desirable locations where they can’t actually afford to purchase themselves, but who want to make the most of the money they are earning right now.
Rentvesting has the potential to provide some with the best of both worlds, Hill added, noting it is always advisable for investors to seek qualified expert advice when considering purchasing in areas they are not familiar with and especially when buying interstate.
“Market fundamentals differ from area to area, plus, there is the added burden of inspecting properties interstate,” she said.
“Unfortunately, the ‘sight unseen’ buying trend that has been prevalent over recent years has the potential for investors to purchase property lemons because of their lack of knowledge about other locations and the tyranny of distance making it very difficult to attend inspections.”
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