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Given the escalating cost of dwellings in Australia’s major cities, cash-strapped househunters are having to find new ways of getting a foothold onto the property ladder – and that means rentvesting.

New research from State Custodians Home Loans, finds that 74 per cent of people now think rentvesting is a good strategy for those struggling to get into the market.

What our survey revealed: for many rentvesting is the only way to buy into property

  • One quarter (25 per cent) of Gen Y – young people aged 18 to 34 - who are struggling the most to buy a first home, now feel rentvesting – a term that has gained more prominence in Australia compared to anywhere else - is the best idea as it’s simply not possible to obtain property any other way.

  • In the survey of 1,006 people nationwide, 33 per cent of all Australians polled across all ages say they’re in favour of rentvesting as it allows people to build equity and live where they want instead of living in a mortgaged house in an area they’re not keen on. Some 31 per cent like that it allows you to get into the property market sooner, and 29 per cent say it’s a good way of providing you with two income streams – rent from tenants and tax benefits.

Gen Y and the lure of the lifestyle factor

  • In particular, many Gen Y respondents feel it is a good way of affording them the lifestyle they want. Around 26 per cent of Gen Y like that it allows you to live in a high-quality rental home (which would be out of their price range to buy) whilst raking in income from elsewhere. Additionally, 32 per cent of Gen Y feel it can be cheaper overall to rentvest than having an owner/occupier mortgage, leaving them more disposable income to spend on other things.

  • State Custodians general manager Joanna Pretty says the question of lifestyle has become one of vital importance to young people in recent times. “More and more young people are choosing to rent in desirable, trendy areas to be close to work, friends and amenities,” she says.

  • 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.

  • The research also showed that both Gen Y (78 per cent) and Gen X (75 per cent) are more likely than Traditionalists aged 65 plus (66 per cent) to think that rentvesting nowadays is a good idea. Additionally, whilst 26 per cent of Gen Y feel it’s more desirable to live in a better-quality rental home than a worse quality mortgaged home, only 19 per cent of Baby Boomers aged 50 – 64 feel the same way.

  • Ms Pretty says these attitudinal differences reflect how much Australian society has changed. “In previous generations young couples settled down quicker and were eager to secure their first home as soon as possible, even if it was nothing flash. They were more prepared to buy properties and fix them up in areas that were not on their radar simply to secure a place.

  • "However young people are now settling down later in life and choosing to - or forced to - rent for longer periods in order to save up enough money for an initial deposit. Or else they’re taking their time to consider their next move and focusing on other things like their career or travel, so they’re entering the market later. What’s more, for many the prospect of buying a place that may require some work, given people’s busy pace of life nowadays, isn’t so appealing."

Consider rentvesting wisely

  • Whilst for some, rentvesting may sound like the answer to their househunting prayers, Ms Pretty also cautions that there are drawbacks to consider such as not having the satisfaction of living in your own space and being at the mercy of a landlord.

  • “There are strong pros and cons for both rentvesting and buying,” says Ms Pretty. “With such a lot on the line it’s really vital the you 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.”