In recent years, more Australians are deviating from traditional homeownership routes, opting instead for ‘rentvesting’—purchasing investment properties as their initial foray into real estate while continuing to rent.
Vantage Financial Experts attributes this trend to soaring interest rates and escalating property prices.
High interest rates and skyrocketing property prices mean first home buyers are finding homeownership increasingly out of reach, and so many are turning to rentvesting as an alternative.
Data from the latest Australian Bureau of Statistics (ABS) Lending Indicators, shows a significant 25% increase in first home buyers choosing investment home loans over the past five years.
Since the ABS started tracking first home investor data in 2019, there’s been a significant shift in the number of Aussies choosing to invest in their first property, rather than live in it.
According to ABS data, first-home investors comprised just 5.54% of the first-home buyer market in 2019. In 2024, first-home rentvestors now make up 6.85% of the total first-home buyer market.
In the first half of this year alone, 4,188 Australians opted to invest in their first home rather than live in it.
Owner-occupiers still dominate the first home buyer market, accounting for over 93%. However, the growing number of investors reflects a shift in how first home buyers are approaching the market amidst high property prices and borrowing costs.
New South Wales, Queensland, and South Australia are the states with the most prolific rentvestors, with Northern Territory showing significant growth in the past year.
The data highlights a growing trend among first home buyers to invest as a strategy to enter the market, amidst high property prices and borrowing costs.
First-time investors are likely targeting areas with good rental yields and rising property prices to boost their equity.
Higher Interest Rates and Loan Sizes Present Challenges for First-Home Investors
Without access to home loan grants and schemes reserved for owner-occupiers, potential investors must carefully consider if this route is suitable, particularly in the current high interest rate environment.
The average investment home loan interest rate in the Vantage Financial database is 7.47% p.a., compared to 6.44% p.a. for first home buyer offers aimed at owner-occupiers.
On a $500,000 home loan, first-home investors could face approximately $328 more in monthly repayments than owner-occupiers.
If you are opting to invest for your first property, just be aware investment loans typically come with higher rates, and the special first home buyer offers from banks are typically only available to owner-occupiers.
Investment properties can be challenging, so you also need to consider whether your potential returns will justify your out-of-pocket expenses and the increased risk of negative cash flow.
Are you considering rentvesting or need advice on the best approach to enter the property market? Contact Vantage Financial at 1800 595 500, email info@vantagefinancial.com.au, or visit vantagefinancial.com.au for expert guidance.
