Almost three-quarters of people believe that investing in a house but continuing to rent elsewhere is a good strategy for those struggling to get into the market.
According to data from non-bank lender State Custodian Home Loans, 74 per cent of people think that "rentvesting" — buying a property you can afford but continuing to rent a property in another location (opposed to investing, which often entails a property owner living in their own home) — is "a good strategy for those struggling to get into the property market".
Further, a quarter of people aged between 18 and 34 (Gen Y) think rentvesting is a good idea, particularly given the inability of many to purchase property in areas where they would want to live, due to escalating property prices (especially in NSW and Vic).
The survey, which polled 1,006 people nationally, found that a third of respondents were in favour of rentvesting, because it allowed people to “build equity and live where they want, instead of living in a mortgaged house in an area they’re not keen on”.
Just over 31 per cent said that they thought rentvesting allowed buyers to “get onto the property market sooner”, while 29 per cent said that it was good for providing rental income and tax benefits.
'Cheaper than a mortgage'
Notably, nearly a third (32 per cent) of Gen Y respondents said that they believed that rentvesting was cheaper than having an owner-occupier mortgage as it allowed them to have more disposable income on hand, while around 26 per cent said that it enables buyers to live in a “high-quality” rental home (which would be out of their price range to buy) while still bringing in an income from elsewhere.
State Custodians general manager Joanna Pretty noted that people are tending to “settle down” later in life and are choosing (or are “forced”) to rent for longer periods in order to save up enough money for an initial deposit.
She added that the question of lifestyle was at the forefront of young people’s minds when it came to buying property.
“More and more young people are choosing to rent in desirable, trendy areas to be close to work, friends and amenities,” she said.
“In this ‘lifestyle-focused’ era, a great rental in a fashionable area can be seen as a more desirable option than buying a place far from the action. However, while these areas provide a great lifestyle, they tend to be more expensive to both rent or buy, which creates a real dilemma when it comes to saving for a home.”
Ms Pretty also said that while rentvesting might be a convenient way to enter the market, drawbacks such as not living in space that you own and being at the “mercy” of a landlord were also to be considered.
“There are strong pros and cons for both rentvesting and buying,” Ms Pretty said. “With such a lot on the line, it’s really vital to carefully consider your financial circumstances before taking any kind of plunge and talk to experts who can advise you on what option is right for you.”