- Can be difficult for a first home buyer to purchase in locations suiting their lifestyle
- 'Rent vesting' is becoming popular among younger buyers
- Well Home Loans has found the top areas nationally to 'rent vest' with a $600K to $800k budget
For younger Australians who live in a large capital city on a budget, it can be difficult to break into the housing market.
This is especially the case given that weekly asking property prices across capital cities average $1.12 million, according to SQM Research (which is upwardly skewed thanks to the Sydney market).
Capital City Average
Due to these prices, many first home buyers face a dilemma.
Do they buy a house in the cities – which would mean to move to the fringes of the city or a completely different city – or do they stay in the local area but purchase a unit?
To help answer this question, Well Home Loans has released data showing why ‘rent vesting’ might be the best option.
‘Rent vesting‘ refers to a buyer purchasing property within their means but rents in another location more suited to their lifestyle. Typically, this means buying in an outer or fringe area while living in an inner-city area.
The data shows that many unit markets in the inner and middle rings of Australia’s capital cities have high vacancy rates, with landlords having to lower rents. While this is good news for tenants, it’s not so good for investors.
Well Home Loans also notes that as more units will be built, the resultant increase in supply could push prices down.
At the same time, there are also house markets across Australia where vacancy rates are low, as is the supply of new houses. These factors are subsequently putting upwards pressure on rents and prices – making the area attractive for investors.
Where to ‘rent vest’ a house
Scott Spencer, Well Home Loans CEO, argues that deciding on the type of property to buy – and where – is a tricky decision.
“A home isn’t just somewhere to live – it’s also an economic asset. So you have to balance the emotional concerns about liveability and security with the hard-headed concerns about financial returns,” he said.
While Well Home Loans found 55 unit market areas with subpar long-term growth potential, it also revealed ten housing markets within the $600,000 and $800,000 range with median yields of around 4%.
Top 10 areas for ‘rent vesting’ a house
|Rank||Area||State||Median yield for houses||Median vacancy rate for houses||Median sale prices range for houses|
|1||Nerang||QLD||4.2%||2.8%||$550K to $770K|
|2||Nambour||QLD||4.2%||2.9%||$495k to $910k|
|3||Port Macquarie||NSW||4.2%||3.9%||$490k to $750k|
|4||Bald Hills – Everton Park||QLD||4.2%||5.5%||$560k to $852k|
|5||Coffs Harbour||NSW||4.2%||5.2%||$470k to $945k|
|6||Joondalup||WA||4.1%||7.0%||$485k to $865k|
|7||Hobart – North East||TAS||4.1%||7.5%||$370k to $785k|
|8||Ormeau – Oxenford||QLD||4%||4.4%||$545k to $915k|
|9||Sunshine Coast Hinterland||QLD||3.9%||3.5%||$571k to $880k|
|10||Nundah||QLD||3.8%||8.5%||$600k to $826k|
Source: Well Home Loans
“We’re definitely not telling first home buyers where they should and shouldn’t buy,” added Mr Spencer.
“Nothing is guaranteed. Some of those unit markets might turn out to deliver strong returns while some of those house markets might end up being poor performers. Also, while financial returns are important, so are concerns about liveability and security.”