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Rentvesting has become a popular entry-point for many Australians to homeownership but with rising rents, is it still a practical option?

When rentvesting, buyers typically buy a property in a relatively affordable market while renting in their desired neighbourhood, usually capital cities. However, with rental markets in capital cities witnessing the biggest annual growth in rents, many would question whether the rentvesting route remains a viable option.

Advisable Property Buyer Kate Hill said rentvesting continues to be a solid investment strategy even with the current rental market conditions.

“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,” she said.

“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.”

A study by CoreLogic showed that despite the double-digit gains in rents across Australia on the back of rental property shortage, record-level net overseas migration, and the return to major cities, the share of suburbs where it is cheaper to rent than buy has increased exponentially over the past year.

The study showed found that only 9.1% of suburbs were cheaper to buy a house than rent, down from 30.2% of suburbs this time last year. For units, just 16% of suburbs are cheaper to buy in than rent, down from 45.2% annually.

“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,” Ms Hill said.

It is crucial to understand, according to Ms Hill, that record low interest rates were always temporary.

“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.”

Ms Hill said buyers who do not want to sacrifice their lifestyle or location to achieve homeownership can still consider rentvesting as a solid option, allowing them to make the most of the money they are earning right now.

“By purchasing in a more affordable location than their current home area, investors can potentially have the best of both worlds — that is, living and renting in the suburb of their choice while simultaneously using their income or savings to invest in property elsewhere,” she said.

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees Max LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkComparePromoted ProductDisclosure
6.04% p.a.
6.06% p.a.
$3,011
Principal & Interest
Variable
$0
$530
90%
4.6 STAR CUSTOMER RATINGS
  • Available for purchase or refinance, min10% deposit needed to qualify.
  • No application, ongoing monthly or annual fees.
  • Dedicated loan specialist throughout the loan application.
Disclosure
5.99% p.a.
5.90% p.a.
$2,995
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender.
  • Backed by the Commonwealth Bank.
Disclosure
6.14% p.a.
6.16% p.a.
$3,043
Principal & Interest
Variable
$0
$350
60%
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

Important Information and Comparison Rate Warning

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