Gen Y becoming “rentvesters” rather than first-time home buyers

Peter Terlato 15 December 2016

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Live where you want, invest elsewhere.

A new survey has found younger generations are taking a different path than the traditional foray into home ownership, investing in property but continuing to live and rent in more preferable, inner-city areas.

NAB's third quarter 2016 Residential Property survey reveals Generation Y, in particular, are choosing to become "rentvesters" rather than entirely abandoning their dreams of property ownership.

Rentvesting is a strategy employed by those unable to afford the property they wish to purchase.

For example, you want to buy a four-bedroom home in Sydney's inner west but sale prices in the area are well above your budget. The rentvesting solution would be to rent the ideal four-bedroom house where you want to live and purchase a different property in an area where prices are more affordable.

rentvesting.com.au founder Peter Mastroianni says young people want to invest, but on their own terms.

"This way, they're having their property cake and eating it too. They're investing for their financial future without having to forgo any of the lifestyle factors that they want and desire," he says.

Despite growing concerns surrounding housing affordability, ING Direct's latest Financial Wellbeing Index suggests there are an increasing number of young buyers (18-34) becoming property investors.

22% of Gen Y own at least one investment property, compared with 20% Gen X and 19% Baby Boomers.

"What's interesting is that while there are continued questions around affordability and the challenges for younger generations in getting onto the property ladder, it’s actually Gen Y that is leading the property investment pack,” ING Direct head of third party distribution Mark Woolnough said.

A number of potential solutions to Australia's housing affordability woes have been offered, from removing negative gearing, to increasing supply, to allowing first home buyers to dip into their superannuation. Another recently put forward, common in the United Kingdom, is staircasing.

As a young property investor, it's important to be proactive, to learn about affordability and the risks involved, compare investment home loan rates, develop a sound strategy and buy in the best suburb.

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