Fact checked
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.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $2,408 | Principal & Interest | Variable | $0 | $530 | 70% | Featured Online ExclusiveUp to $4k cashback |
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5.99% p.a. | 5.90% p.a. | $2,396 | Principal & Interest | Variable | $0 | $0 | 80% |
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6.14% p.a. | 6.16% p.a. | $2,434 | Principal & Interest | Variable | $0 | $250 | 60% |
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5.95% p.a. | 5.95% p.a. | $2,385 | Principal & Interest | Variable | $0 | $0 | 90% | |||||||||||
5.94% p.a. | 5.95% p.a. | $2,383 | Principal & Interest | Variable | $0 | $0 | 90% |
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Photo by Snowdrop’s Images on Canva.
Collections: Rentvesting Property Investment
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