{"id":29046,"date":"2020-11-13T16:53:17","date_gmt":"2020-11-13T03:53:17","guid":{"rendered":"https:\/\/propertynoise.co.nz\/au\/?p=29046"},"modified":"2020-11-13T16:53:17","modified_gmt":"2020-11-13T03:53:17","slug":"rentvesting-reviving-dream-home-hopes-for-young-aussies","status":"publish","type":"post","link":"https:\/\/propertynoise.co.nz\/au\/rentvesting-reviving-dream-home-hopes-for-young-aussies\/","title":{"rendered":"‘Rentvesting’ reviving dream home hopes for young Aussies"},"content":{"rendered":"

PHOTO: Young Australians are increasingly pessimistic around owning their dream home, but there’s still hope. Photo: Shutterstock<\/strong><\/p>\n

REPUBLISHED WITH PERMISSION | API MAGAZINE<\/a><\/strong><\/p>\n

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Buying your first house and not actually living in it may not, at first glance, appear to be a clear pathway to owning your dream home.<\/p>\n

But it is emerging as an effective way for young Australians to get a foothold on the property ladder.<\/p>\n

For many of the country\u2019s younger generations, the aspiration of home ownership, particularly in Australia\u2019s bigger cities, has become more abject fantasy than possible reality.<\/p>\n

While housing affordability has improved in recent years, median house prices in Melbourne and Sydney remain elevated at around $660,000 and $860,000, respectively, consigning young Australians to scrap, save and sacrifice for years to amass a deposit.<\/p>\n

When those median house prices are contrasted with Australians\u2019 median income of $48,360 per year, as reported by the Australian Bureau of Statistics, it is not entirely surprising that levels of negative sentiment towards property investment are on the rise.<\/p>\n

Melbourne headquartered lender ME Bank\u2019s research shows that concerns about housing affordability in Australia have been building to crescendo in recent years, with Millennials and Generation Z nearly losing all hope of ever owning their dream house.<\/p>\n

A recent ME Bank survey of Gen Z and Gen Ys in September revealed that 70 per cent of respondents thought that owning a dream home was impossible to achieve for their generation, with 62 per cent saying the next generation would also battle.<\/p>\n

More than half of the respondents said finding a dream job or owning a dream home was unlikely, with financial security weighing heavily on the minds of young Australians.<\/p>\n

ME Bank general manager of home lending Andrew Bartolo said the depth of the negative sentiment that emerged from the survey was somewhat of a surprise.<\/p>\n

\u201cCertainly what is very clear is that those negative emotions are very strong in this demographic,\u201d Mr Bartolo told\u00a0Australian Property Investor Magazine<\/em>.<\/p>\n

\u201cThe survey says that 58 per cent say that owning a dream home is unlikely.<\/p>\n

\u201cI was surprised, but our advice that we would say to prospective homebuyers and young Australians is to really plan and think about their savings goals, and ultimately plan a path to home ownership.<\/p>\n

\u201cWe would really be suggesting and advising those customers to really plan out their home buying journey and to not lose hope.\u201d<\/p>\n

The survey also revealed that the COVID-19 outbreak had exacerbated the long-running trend of increasing property pessimism, with 57 per cent of respondents saying the economic crisis would result in them delaying or downgrading their real estate plans.<\/p>\n

Survey participants were also asked to describe the \u2018Great Australian Dream\u2019 before and after the pandemic, with home ownership featuring prominently prior to the crisis, and all but abandoned after its impacts were felt.<\/p>\n

Financial advisor and property investor Billie Christofi, however, believes there is no time like the present for young Australians to take control of their financial future and plan for home ownership.<\/p>\n

\u201cThe Australian dream is no longer about owning one property, in an area you might not even like, and living in it for the rest of your life,\u201d Ms Christofi told\u00a0API<\/em>.<\/p>\n

\u201cThere are a number of investment strategies open to young Australians that can help them secure their financial future, even during these difficult times.\u2019<\/p>\n

\"Billie<\/p>\n
Billie Christofi says there are many ways young Australians can obtain financial security.<\/strong><\/em><\/div>\n<\/div>\n

Ms Christofi, who has been crafting wealth building strategies at Melbourne-based advisory group Reventon since 2011, got onto the\u00a0property market herself at a young age by investing in property syndicates to quickly build a deposit<\/a>.<\/p>\n

Another strategy for young people, she said, was to \u2018buddy up\u2019 with friends and family, and collectively increase buying power.<\/p>\n

But a more effective strategy that Ms Christofi said she had increasingly been recommending to young people looking to buy their first home was \u2018rentvesting\u2019.<\/p>\n

\u201cRentvesting is about buying where you can afford and renting where you choose to live,\u201d she said.<\/p>\n

\u201cLife is short so, by \u2018rentvesting\u2019, you can still live the lifestyle you want while making contributions to your savings through an investment purchase elsewhere.\u201d<\/p>\n

Ms Christofi said there were several factors that made rentvesting an appealing strategy, not the least of which was the ability to pay down a mortgage faster than one would if they bought a home and lived in it.<\/p>\n

\u201cWhen you buy your own home, your repayments are going towards paying down your debt and you\u2019re not getting any assistance in the form of tax benefits, depreciation, or rental income that helps pay down that mortgage quicker,\u201d\u2019 she said.<\/p>\n

\u201cWhen you\u2019ve got an investment property, yes you have got to rent somewhere else, but you can generally pick something that\u2019s a bit more affordable because you\u2019re not buying something from an emotional perspective.\u201d<\/p>\n

With interest rates at record lows, Ms Christofi said there was great potential for investors to acquire cash-flow positive properties – even for first time buyers.<\/p>\n

\u201cThe key thing is finding areas that will grow,\u201d Ms Christofi said.<\/p>\n

\u201cWhen you\u2019re picking somewhere to live, you are picking a certain suburb that\u2019s close to your work or your friends, but that might not be the area that\u2019s going to see the most growth.<\/p>\n

\u201cRight now, Melbourne\u2019s CBD is going backwards, and that\u2019s because vacancy rates are increasing and the market\u2019s slowed down. It\u2019s not a good place to invest, but it might still be where you want to live.<\/p>\n

\u201cWhereas, if you look in regional Victoria, in areas such as\u00a0Geelong<\/a>, prices have increased, so that\u2019s a fantastic place to look at investing.\u201d<\/p>\n

Ms Christofi said the ideal property type for a rentvesting strategy would be a detached house, located in an area where land values are likely to appreciate.<\/p>\n

\u201cYou look at employment rates, you look at where the government is putting in infrastructure, you look at schools, transport, all of these things make it a great opportunity for an investor and are appealing to the rental market,\u201d she said.<\/p>\n

\u201cI would recommend looking at regional house and land, around the $450,000 to $550,000 purchase price.<\/p>\n

\u201cThat\u2019s going to give you the best rental yield and you\u2019re going to be able to pay down your mortgage.<\/p>\n

\u201cYou don\u2019t want to go too high, if you\u2019re looking at something any more expensive, it\u2019s going to affect your cash flow.\u201d<\/p>\n<\/div>\n<\/div>\n<\/section>\n

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