According to new research released today, around one-third of first-time buyers are opting to “rentvest” rather than be owner-occupiers.
Property Investment Professionals of Australia’s (PIPA) latest survey data found that 36 per cent of first-time buyers in the past 12 months chose to invest in a property in a more affordable area and continue to rent.
According to PIPA chairman Peter Kouzilos, this is the first time the survey has asked this question of first home buyers. He says the results may indicate that rentvesting has been a popular choice for some time.
“What this insight shows us is that first-time property buyers generally have probably been more active over recent years than official statistics originally recorded,” he said.
“The Australian Bureau of Statistics (ABS) publicly admitted issues with first home buyer statistics from 2012 to 2016, in part due to some lenders only reporting loans to first home buyers who received a First Home Owner Grant.
“Of course, most grants were restricted to first-timers buying a new property as their home, not as an investment, many years ago.”
Mr Koulizos said that changes to ABS collection of data mean that first-time investors are now being counted.
According to the ABS, close to 18 per cent of places financed in Australia in September were to first-time buyers.
“There’s no doubt that the softer market conditions are making it easier for first-time buyers when it comes to purchase prices. However, lending restrictions are conversely making it more difficult for them to secure finance,” Mr Koulizos said.
“On top of this, it appears that recent political assertions that first-time buyers are only one in seven purchases â€“ or 14 per cent â€“ is factually incorrect.”
“It seems that the dream of property ownership has remained alive and well for some time, with many first-timers opting to improve their financial futures by investing in more affordable locations while renting elsewhere.”
Mr Koulizos said it was interesting to note that the majority of these first-time investor buyers were buying established properties, despite state government grants available to purchase new dwellings.
He said this was particularly relevant due to Labor’s proposed changes to negative gearing, as it appears many first-time home buyers purchasing to invest are buying established property.
“About 83 per cent of first-timers purchased existing property, with only 14 per cent buying new or off-the-plan,” Mr Koulizos said.
“This is partly due to affordability considerations, with established properties generally available for lower price points than new, plus the majority of all investors always prefer existing properties.”
“Established property has greater capital growth, and any tax benefits associated with new property generally doesn’t make up for comparably poorer price performance over the long term,” he said.
Overall, the majority of survey respondents (63 per cent) said they would consider rentvesting as a property investment strategy.
Stephanie Aikins, nestegg.com.au. 4 December 2018