'Rentvesting' rates rise as Sydney property prices force buyers elsewhere

by Mike Wood25 Mar 2021

Potential homeowners are eschewing Sydney’s high property prices and investing their money elsewhere in Australia, according to a leading Sydney buying agent.

The trend of “rentvesting” – where customers choose to continue renting the property in which they live but buy a property elsewhere as an investment – has been on the rise as Sydney property prices continue to spiral and vacancy rates keep prices steady in the rental market.

“The trend that I feel has been going on for some time, but particularly in the last six months with my clients, is that people are now starting to be priced out of certain parts of Sydney,” said Ben Plohl, founder at BFP Property Buyers. “So rather than being forced to live in an area that they might not necessarily want to, they’re considering the rentvesting strategy. Put simply, it’s ‘Live where you want to live, invest where you can afford’.”

“Take a client that has a budget of a million bucks, and they love the Lower North Shore or the Inner West. As ordinary as it sounds, that cash doesn’t get you far for a two-bed apartment in a nice block. So what I’m seeing now is clients considering using that available capital and investing it in other strategic markets across the country and continuing to rent in a location that they like.”

Many see the rentvesting strategy as a way to get their money into something for their future while maintaining the kind of lifestyle that inner city living affords.

“I think for a long time, it’s been engrained in us that rent money is dead money,” said Plohl. “But I think that if you look at it from a different perspective, renting a home that you live in provides you a lifestyle benefit and can be close to the amenities that you want to have a meaningful life. If you’re at the same time investing in alternative markets, as long as your capital is working for you, then I don’t see that as a bad strategy. In some instances it, it can work in your favour.”

“There are many opportunities and locations out of Sydney that will provide you with a far superior RoI and better growth opportunities. People, especially the younger demographic, aren’t so excited about putting a million dollars into an asset in Sydney. That’s a lot of money, and perhaps spreading it into two growth assets in other markets is a better idea.”

Rentvesting is not a new idea, but it has taken off in recent months as Sydney’s property prices leave the tier of consumers that might want to buy in the city unable to get onto the property market where they live.

“It’s been around for years,” said Plohl. “I think in the last 12 to 18 months, it’s become more of a trend. Even more so over the last six months with the clients that I work with, maybe even in the last three months. In Sydney, where the market is moving at a rapid rate, people are being priced out.”

“I have a client who lives in a lovely part of the Lower North Shore, and six months ago she would have been in a position to buy a lovely two-bed apartment in that area. Now, as a buyer, she needs to go two or three suburbs further away and she just doesn’t want to do that. So we said she should keep renting that area that she likes, but let’s use that borrowing capacity and that capital and inject it into two growth assets in alternative markets that we know based on our research and data analytics are going to perform quite well in the short term. I can say with a pretty high degree of confidence that we’re seeing the data on the ground, tracking it, and translating it into the price figures.”