Renter-investor numbers rise to one in five: survey

The renter-investor market looks to set to nearly double in size over the next two years, according to a survey of first-time investors carried out by Mortgage Choice.

Out of 1,060 respondents who plan to buy their first investment property over the next two years, 19% will be making their first home purchase.

Earlier this year, Terry Burke, professor of housing studies at Swinburne University, estimated 11% of all residential properties are purchased by people who rent their own homes.

The renter-investor market is strongest in Sydney, where 29% of respondents say buying an investment property will be their first home purchase, followed closely by Queensland’s Sunshine Coast (28%) and Melbourne (25%).

Investors are evenly split as to where they plan to buy their first property, with Queensland (22%), followed by Victoria (20%), South Australia (18.4%), NSW (18%) and WA (18%).

While the majority of investors plan to buy in the metropolitan region or state they live in, more than one in 10 (12.5%) Victorian investors plan to buy their first property in Queensland and a third of Northern Territory investors also favour the Sunshine state over their own backyard.

Mortgage Choice spokesperson Kristy Sheppard says the survey revealed that first-time property investors are “logical, well-planned, long-term thinkers who were determined, careful researchers and aware of their limitations”.

“This maybe why so many are buying for investment purposes before becoming a home owner,” she says.

According to Mortgage Choice, 84% of first-time investors already knew how much of an interest rate buffer they were going to factor into their repayment budget, and only 2% are not putting in a buffer.

Furthermore, 47% are looking to hold onto the property for 10 years or longer and 43% are looking at five to 10 years.”

Smartline Personal Mortgage Advisors has also noted a growing number of renter-investors, driven by a desire to live nearer to suburbs that suit their lifestyle and nearer to their workplaces.

Managing director Chris Acret says there are also financial incentives: if properties are held for longer, investors can draw on the equity to fund a home or additional investment properties and avoid paying selling costs and capital gains tax.

“There are also a range of options available to minimise cashflow shortfalls when owning an investment property, such as making interest-only payments, maintaining depreciation schedules, conducting regular rent reviews, and having tax adjustments paid back to you monthly,” he says.

Other key results from the Mortgage Choice survey are:

• 44% of first-time investors are not concerned by falling property prices and 40% are only a little bothered
• 23% will purchase alone, 69% will buy with a partner and 5% will buy with friends
• The most common finance strategy is borrowing while using equity in their home as security
• 31% will use a mortgage broker for the purchase and 48% might use a broker
• 69% will make, or are already making, lifestyle sacrifices in order to buy
• Favourite property type is a small house of one to three bedrooms
• Top two property features were tenant demand in the area and right suburb and street.