How the rise of the rentvestor impacts Canberra: Nicola Powell

If I could choose a real estate buzzword of the moment, it would be “rentvestor”. The term describes those who continue to rent in an inner-city location that is far out of reach of their budget. Instead, they choose to buy in an area that is within their financial means.

Rentvestors have been active for some time, driven by the astounding price gains experienced in certain major cities in recent years, as well as the lifestyle preferences of some first home buyers.

It has become the choice for many locked out of buying in an area where they want to live – a way to gain equity in a property in the outer suburbs, regional areas and, for some, a different state.

The rentvestor concept is a trend that is perhaps associated with our more populous cities that have substantial property prices. The extraordinary price growth in Sydney and Melbourne has forced tenants to look to more affordable markets to buy a property – Canberra being one of them.

Sydney’s median house price remains more than $1 million – an amount that could buy an executive residence in Canberra. The current median Sydney unit price of $757,991 could easily buy two units in Canberra, and is almost $35,000 above Canberra’s median house price of $723,299. Thus buying a home in Canberra becomes an attractive proposition providing ample opportunity for the first-time investor.

Rentvesting is not necessarily being adopted by Canberrans. Opportunity exists for locals wanting to purchase. Falling unit prices have helped to create choice for local first home buyers, and with the NSW first home buyer stamp duty exemptions applicable for new and established homes below $650,000, it has made a purchase in regional NSW an attractive alternative.

The rentvestor is a trend whereby the Canberra market has become a recipient. Interstate first home buyers vying to obtain equity in a property are turning to more affordable options and solid rental conditions that Canberra offers.

Buoyant investor activity during the past financial year has helped to absorb the heightened level of unit supply. Investor loan values during the 2016-17 financial year were the second highest on record at $2.39 billion. Rentvestors are likely to have contributed to this hefty figure.

• Related: Rentvesting ‘creating a city of landlords’
• Related: Investors getting first-home buyer benefits
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The active investor market has helped to boost rental supply. Tenants have been contending with increasing rental prices and tight vacancy rates. If the rentvesting trend continues, it could help to provide additional stock and ease the financial burden of rising weekly rents.

Nicola Powell is a property expert for Allhomes. Twitter: @DocNicolaPowell