Safe as houses: Perth’s first-time buyers who won’t live in their new homes

A growing number of young adults are ditching renting, staying at home and buying a house for investment purposes rather than to live in.

Nu Wealth managing director Daniel McQuillan said the latest ABS lending figures showed that for the first nine months of 2024, investor first-home buyers borrowed more than $366 million to purchase a home, an increase of more than 30 per cent.

An increasing number of younger people are staying home and “rentvesting”.Credit: Steven Siewert

“While first home buyers who purchase a home for investment purposes are still a relatively small part of the overall first home buyer market, Nu Wealth expects this trend to increase as affordability pressures grow in the Western Australian housing market,” he said.

“First-home buyers are choosing to buy a home for investment purposes rather than to live in the home as it can put them into a stronger position to get into the housing market faster and into a better area with higher capital growth potential.

“We are finding this option is proving very attractive to first-home buyers who plan to live in their family home for a number of years as it means that they can more quickly get into the property market.”

A major advantage for first-home buyers is that the rental income from the property can help pay the mortgage while also assisting with their home approval process as the additional income can mean they can take out a larger loan to purchase into a higher capital growth area.

McQuillan said there were also major tax depreciation benefits for property investors.

“This tax advantage is very attractive to first-home buyers who are in a high-income job such as a FIFO worker and paying significant amounts of tax each year,” he said.

Ray White Group chief economist Nerida Conisbee said “rentvesting” made sense, particularly if you had a great rental deal.

“While you can’t access first-home buyers’ incentives, you can take advantage of negative gearing, which can in many circumstances be far more cost-effective than accessing a first-home buyer incentive,” she said.

“The best time to buy is when you are ready and the earlier you buy, the easier it is to build wealth long term and, at the very least, have paid off your mortgage by retirement, if not earlier.

“Many people try to wait for the ideal time to buy from a market timing perspective. This is extremely difficult and even people who study the market in detail can get the outlook very wrong. Long term, it generally makes a limited difference anyway given how property markets perform over time.”

Mark Hay Realty principal Mark Hay said investing in property was traditionally more popular with older investors.

“Property as an asset class is tangible, you can touch it, feel it, improve it, manage it yourself, even sell or lease it,” he said.

“It is viewed as an extremely good asset class for collateral to borrow against the net worth of the property to acquire other assets.”

Hay said when property investment was compared with shares over time, history showed there was not much difference in gains over an extended period.

“The downside of the share market is sometimes it is akin to playing darts, and some of the best and strongest companies have been laid waste in certain economic times due to incompetency of directors or changing circumstances, trends, markets and even corruption,” he said.

“Some classic corporate carcasses are Ansett, Bell Resources, Mirage Resorts, Enron, and Motorola. You have greater control over your asset in property and very little, if any, control over your shares.”

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