Auckland’s has a median value that tipped over the $1million mark late last year, causing price increases to spill out to neighbouring regions.
First home buyers are perhaps the most affected by price hikes, as the size of the deposit they need increases by the day. While property prices in Auckland may finally be levelling out, it’s still difficult for new buyers to get into the market using conventional strategies.
First home buyers are perhaps the most affected by price hikes, as the size of the deposit they need increases by the day.
That’s why rentvestment is such an interesting option. With an eye to making it easier for young Kiwis nationwide to buy their first property, we’ve had a closer look at this alternative strategy, discussing why it’s such an effective shortcut into the market.
RENTVESTING: A HOME BUYING SHORTCUT
There’s an accepted way of doing things for first home buyers in Auckland these days that involves sacrificing your lifestyle to afford mortgage payments and moving far away from work, family and friends.
It doesn’t have to be that way. Rentvesting is an alternative strategy which involves renting a property where you want to live and buying your first home as an investment in another location. It may be unconventional and unfamiliar, but in such an extraordinary market it could be your best option.
LIVE WHERE YOU WANT TO LIVE
Living where you want to live may be the most attractive benefit that rentvesting offers.
Living where you want to live may be the most attractive benefit that rentvesting offers. Because you’ll be renting your primary residence, you won’t be at the mercy of sky-high property prices and can live wherever you can afford to rent.
This means that city centre’s and desirable city fringe suburbs around New Zealand aren’t out of the picture for first home buyers.
It reduces the impact that high prices have on your lifestyle and allows first home buyers to get onto the property ladder without forcing you into an hour-long commute.
BUY WHERE YOU CAN
CoreLogic’s most recent data shows that value increases in most areas in Auckland exceed 10 per cent over the 12 months to March.
New Zealand’s average value is behaving similarly, increasing by over 12 per cent during the same period.
With prices all around the country at a high and increasing by the day, affordability is a key concern for most buyers. By rentvesting, you’re not restricted to buying in places near your work, or where you’d want to live. Instead, you can look at areas based solely on what you can afford.
Home buyers in Auckland, Hamilton, Queenstown and Tauranga, in particular, could benefit from this approach as prices in their home markets are becoming increasingly unaffordable. Locations like Rotorua and Palmerston North offer viable alternatives with average values under $400,000, according to QV.
FOCUS ON PROFITABILITY
When buying your first home as your primary residence, your focus is on proximity to work, school and family. On the other hand, when buying as an investment (or rentvestment) the only thing you must consider is the property’s ability to turn a profit.
This means that you can buy in areas like South Waikato or Rotorua where rental yields are high and QV reports value gains close to 30 per cent per annum. By investing your money smartly you can hasten your climb up the property ladder and make your goal of buying your dream home a reality.