Amid high rates and rising property prices, more first-time buyers are turning to investment properties instead of purchasing homes to live in, according to new Mozo research.
Mozo’s research revealed a 25% increase in first-home investors over the past five years.
“RBA’s decision to maintain the cash rate reflects ongoing caution in a volatile economic environment, but it does little to ease the strain on first-home buyers,” said Rachel Wastell (pictured above), Mozo’s personal finance expert.
“High rates and skyrocketing property prices mean first-home buyers are finding homeownership increasingly out of reach, and so many are turning to rent-vesting as an alternative.”
While the number of first-home investors is growing in most states, Victoria has seen a slight decline since 2022.
New South Wales leads with 9.42% of first-home buyers choosing investment properties in 2024, up from 8.62% in 2019.
Queensland and South Australia also show significant growth, with increases from 4.5% to 7.53% and 5.51% to 7.79%, respectively.
First-home investors face higher interest rates compared to owner-occupiers, with average rates 1.01% higher.
This difference translates to an additional $564 per month on a $500,000 loan.
However, securing the lowest available rates could save investors up to $124 per month.
“Investment properties can be challenging, so you need to consider whether your potential returns will justify your out-of-pocket expenses and the increased risk of negative cash flow,” Wastell said.
“There are currently 12 special first-home buyer owner-occupier loans offering lower rates on average than investors, but there’s still ample opportunity for first-time investors to save on repayments by getting a low rate.”
As property prices and borrowing costs continue to rise, the trend of first-home buyers turning to investment properties is growing. The economic landscape remains uncertain, and potential first-home investors must weigh the risks and rewards carefully.
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