The times, they are a changing.
Where owning one’s home was once the Great Australian Dream, skyrocketing property prices are seeing Australians change up the expectation and ideals around property and investment.
As property prices escalate in Melbourne and Sydney, a growing number of residents are choosing to rent instead of buying in their excessively expensive cities.
Instead, people are looking outside their states to snap up a bargain and get into the property market, experts say, and both Hobart and the Gold Coast are topping the list with this trend.
More than 513,000 searches in 2018 for homes on realestate.com.au outside of NSW were concentrated to within 30 kilometres of the Gold Coast.
Nine of the top 20 interstate searches were suburbs close to the seaside Queensland city.
Seven of the 20 most searched suburbs outside of Victoria are located in Tasmania, nearly 270,000, followed by Moama in NSW with 74,543 and 52,789 for Surfers Paradise in Queensland.
So what is rentvesting?
The trend of renting the house you live in and investing elsewhere has been coined “rentvesting” by Realestate.com.au chief economist Nerida Conisbee – basically, instead of buying property in the location they want to live, people rent a home and invest their money in other growing markets.
“The lower price point is a good thing because if you have a look at what you can buy in Hobart with a fairly low deposit compared to what you can buy in Melbourne, it does give you more home and a better location for your money,” she told news.com.au.
“That’s also been quite an attractive thing particularly for younger people who may not have had the opportunity to get a deposit together for a home in Melbourne.
“When we look at what’s happening in the last few years in both Sydney and Melbourne, that extreme pricing has really pushed people into looking at alternative ways to get into the market, and rentvesting is obviously a good way to do that.”
Ms Conisbee said areas just over the border dominated searches in more affordable regions such as South Australia and Queensland, showing buyers unlikely to be looking to invest and rather, looking for a home.
CoreLogic head of research Tim Lawless said residents in Australia’s most expensive and biggest cities were overwhelmed by additional costs associated with owning property.
“Purchasing outside of Sydney and Melbourne as an investor has been a worthwhile option for many buyers,” he said.
“It does highlight the affordability constraints that have become formidable barriers to participating in the Sydney and Melbourne housing markets.
“Many buyers probably still aspire to owning a home in their local city and see the option of investing in other areas as a logical stepping stone on their way to more localised home ownership.”
He said rentvesting was likely having a negative impact on overall demand in the market.
“But this is a natural result of housing affordability being such a challenge for many prospective buyers,” Mr Lawless said.
“As Sydney and Melbourne home values trend lower, affordability is gradually improving and we may find more buyers are happy to once again explore more localised opportunities to purchase a dwelling.”
Who are these rentvestors?
Rent.com.au chief executive Greg Bader said their site had noticed a growing trend of rentvestors buying property where they could afford and renting where they wanted to live.
“Based on our data, the typical profile of rentvestors are a young couple, living in central metro areas of capital cities, with a household income of more than $100,000 per year who pay about $500 per week to live in the area that they want to,” he said.
“About 25 per cent of our customers indicate they currently own an investment property (but live elsewhere) or are currently saving to purchase a property they don’t intend to live in.”
According to Anthony Ziebell, founder of tenancy advocate, Don’t Rent Me, the rentvesting trend is creating a ‘city of landlords’ and digging the grave deeper for renters in a market of rising unaffordability.
But many experts support the strategy, with attractive tax benefits, flexibility in location and option to enter the housing market sooner.
Property expert Michael Yardney describes rentvesting as a ‘smart property acquisition strategy’ that is a ‘paradigm shift away from the traditional idea of the ‘white picket fence house’.