New data from online lender Well Money has revealed 30 of the best rentvesting markets and 30 unit markets where it’s better to buy then rent.
Despite falling property prices in many capital city suburbs, it is still hard for first home buyers to enter those areas with a budget between $500,000 and $800,000, especially as rising interest rates are reducing borrowing capacity.
Many are often forced to choose between buying a unit in their local area or buying a house on the fringes of the city, which is why the trend of rentvesting is rising in popularity. Simply put, rentvesting involves buyers renting a property where they want to live and buying an investment property in a suburb they can afford.
Well Money CEO Scott Spencer (pictured above) said the 30-unit suburbs identified had subpar long-term growth potential and the 30 rentvesting markets identified were places where you could buy a house that not only fitted a budget of $500,000 to $800,000, but also had good long-term growth potential and good cashflow.
“Prices are falling, which is making housing more affordable, however, prices are falling from a high base so they’re still elevated,” Spencer said.
“Another challenge for first home buyers is that while interest rates remain low by historical standards, they’re rising and are likely to rise further, which is affecting their borrowing capacity. First home buyers who live in capital cities and have a budget of $500,000 to $800,000 have a tough choice to make.”
Spencer said in the future if the investment property grew in value, first home buyers could potentially sell it and use the money to buy an owner-occupied house in a desirable suburb in their current city.
"That said, it would be important to take a long-term view with any investment purchase,” he said. “Many markets around Australia are softening right now, so prices might have further to fall before we potentially enter the next growth cycle."
Natalie Sheehan, head of distribution at non-bank lender Brighten Home Loans said first-home buyers fear being priced out of the market as the cost of living rises.
“There are also government [home ownership] schemes available,” Sheehan said. “I can see why the government is encouraging this. However, timing is everything as allocations are limited to only a number of spaces available.”
|
State |
Suburb |
Median Sale Price Units |
Vacancy Rates Units |
Median Weekly Rent Units |
|---|---|---|---|---|
|
NSW |
Miller |
$570,000 |
3.7% |
$220 |
|
NSW |
Narellan |
$575,000 |
1.6% |
$430 |
|
NSW |
Wentworthville |
$575,000 |
1.8% |
$430 |
|
VIC |
Manor Lakes |
$585,000 |
2% |
$330 |
|
VIC |
Noble Park North |
$590,000 |
2% |
$380 |
|
VIC |
Ascot Vale |
$580,000 |
2.1% |
$380 |
|
VIC |
Ormond |
$580,000 |
1.8% |
$385 |
|
VIC |
Deer Park |
$510,000 |
2.3% |
$350 |
|
VIC |
Sunshine North |
$550,000 |
3.8% |
$395 |
|
QLD |
Redland Bay |
$525,000 |
1.8% |
$455 |
Spencer said if people didn’t want to buy a unit in one of the above suburbs, they could rentvest in one of the below suburbs instead.
“These 10 suburbs all feature suburbs where houses are priced in the same price range as the suburbs on the units list,” he said. “These are locations where upwards pressure is being placed on weekly rents and property prices as vacancy rates are below 1.5% and yields are above 3.5%.
|
State |
Suburb |
Median Sale Price Houses |
Vacancy Rates Houses |
Median Weekly Rent Houses |
|---|---|---|---|---|
|
NSW |
Karuah |
$562,500 |
0% |
4.4% |
|
TAS |
Claremont |
$560,000 |
1.1% |
4.4% |
|
TAS |
Invermay |
$502,000 |
0.8% |
4.4% |
|
VIC |
Wodonga |
$505,000 |
0.5% |
4.3% |
|
TAS |
Summerhill |
$535,000 |
0.6% |
4.3% |
|
TAS |
Kings Meadows |
$550,000 |
0.7% |
4.3% |
|
TAS |
St Leonards |
$535,000 |
1.3% |
4.2% |
|
VIC |
Tawonga South |
$565,000 |
0% |
4.1% |
|
NSW |
Bega |
$582,000 |
1.2% |
3.8% |
|
NSW |
Woodberry |
$555,000 |
0% |
3.7% |
Spencer said if you had a budget up to $700,000, you could buy a unit in about 50% of Sydney suburbs, 85% in Melbourne and 100% in Hobart.
|
State |
Suburb |
Median Sale Price Units |
Vacancy Rates Units |
Median Weekly Rent Houses |
|---|---|---|---|---|
|
NSW |
Sefton |
$610,000 |
2.1% |
$400 |
|
VIC |
West Footscray |
$620,000 |
2.4% |
$325 |
|
VIC |
South Kingsville |
$670,000 |
1.9% |
$360 |
|
VIC |
Thornbury |
$645,000 |
1.9% |
$360 |
|
VIC |
Parkville |
$645,000 |
2.2% |
$395 |
|
VIC |
Coburg North |
$695,000 |
1.8% |
$430 |
|
VIC |
Malvern |
$639,000 |
2.1% |
$400 |
|
VIC |
Caulfield North |
$666,000 |
1.8% |
$420 |
|
VIC |
Northcote |
$659,000 |
2.1% |
$420 |
|
VIC |
Ripponlea |
$618,000 |
2.8% |
$400 |
Spencer said the below suburbs each had houses that were priced in the same price range as the suburbs on the units list.
|
State |
Suburb |
|
Median Sale Price Houses |
Vacancy Rates Houses |
Median Weekly Rent Houses |
|---|---|---|---|---|---|
|
TAS |
Berriedale |
|
$620,000 |
0.7% |
4.2% |
|
TAS |
Norwood |
|
$603,000 |
1.4% |
4.1% |
|
TAS |
Mornington |
|
$630,000 |
0% |
4.1% |
|
NSW |
Raymond Terrace |
|
$610,000 |
0.4% |
4.1% |
|
TAS |
Lutana |
|
$662,000 |
1% |
4.1% |
|
VIC |
Baranduda |
|
$610,000 |
1.2% |
4% |
|
NSW |
Mallabula |
|
$620,000 |
0% |
4% |
|
NSW |
Wauchope |
|
$635,000 |
0.8% |
4% |
|
TAS |
Riverside |
|
$632,000 |
1% |
3.9% |
|
TAS |
Newstead |
|
$680,000 |
0.5% |
3.8% |
Spencer said with a budget up to $800,000, you could buy a unit in about 70% of Sydney suburbs, 95% in Melbourne, 98% in Perth, 100% in Hobart and Canberra.
|
State |
Suburb |
Median Sale Prices Units |
Vacancy Rates Units |
Median Weekly Rent Units |
|---|---|---|---|---|
|
NSW |
Asquith |
$710,000 |
1.9% |
$490 |
|
VIC |
Forest Hill |
$791,500 |
1.8% |
$400 |
|
VIC |
Strathmore |
$750,000 |
4.3% |
$400 |
|
VIC |
Hughesdale |
$775,000 |
1.7% |
$420 |
|
VIC |
Clayton |
$765,000 |
1.8% |
$415 |
|
VIC |
Bulleen |
$775,000 |
2.1% |
$480 |
|
VIC |
Fitzroy |
$798,400 |
2.8% |
$500 |
|
WA |
Burswood |
$775,000 |
2% |
$545 |
|
TAS |
North Hobart |
$775,000 |
2.1% |
$465 |
|
ACT |
Giralang |
$755,000 |
1.9% |
$520 |
Spencer said the below suburbs each had houses that were priced in the same price range as the suburbs on the units list.
|
State |
Suburb |
Median Sale Price Houses |
Vacancy Rate Houses |
Median Weekly Rent Houses |
|---|---|---|---|---|
|
TAS |
Geilston Bay |
$770,000 |
1% |
4.1% |
|
NSW |
Medowie |
$770,000 |
0.8% |
4% |
|
ACT |
Charnwood |
$718,000 |
1% |
4% |
|
NSW |
Macquarie Hills |
$785,000 |
0% |
4% |
|
NSW |
Maryland |
$715,000 |
0.3% |
3.9% |
|
NSW |
Watanobbi |
$715,000 |
0.9% |
3.9% |
|
NSW |
Hawks Nest |
$710,000 |
0.8% |
3.8% |
|
NSW |
Cardiff South |
$740,000 |
1.2% |
3.8% |
|
NSW |
Mt Hutton |
$755,000 |
1.3% |
3.8% |
|
NSW |
Blue Haven |
$750,000 |
0.2% |
3.7% |
On January 9, CoreLogic revealed Australian home values record biggest fall ever, dropping 8.40% on January 7, after their peak in May 2022.
“In addition to constrained borrowing capacity, higher interest costs may be dissuading potential buyers altogether,” said CoreLogic.
“Australians are also more indebted today than through historic periods of rate rises, with the latest Reserve Bank of Australia’s estimate of housing debt-to-income ratio sitting at 188.5%. A decade ago, this figure was 162.0% and in 2002 the ratio was 130.2%.”
What do you think about renvesting in 2023? Let us know in the comments below.
