You know how they say you should never talk about politics, sport or religion at a dinner party? Well, if you’re looking for a sure-fire topic of conversation in Australia, something that’s guaranteed to go down a treat, just talk about property. It never fails.
Talking about the property market is the national pastime – and if you’re a young professional in Australia, everyone will tell you that the first thing you need to do is get on the property ladder, by any means necessary. But that’s easier said than done. With property prices around the country (but especially in our big cities like Sydney and Melbourne) at astronomical levels, the amount your professionals need to borrow in order to secure property is insane – and therefore, so are deposits.
So what’s the alternative – renting for the rest of your life? Everyone knows that’s ‘dead money’. Well, there’s another solution: ‘rentvesting’ – and it might mean that you’re better off renting your home than buying your home, at least in the short term.
Mark Bouris, Executive Chairman of Yellow Brick Road, former host of The Apprentice Australia and nationally-renowned money expert, went on Channel 7’s Sunrise earlier this week to talk about the Australian property market and offer some clarity to Aussies confused by the current lay of the land.
While Bouris starts off by saying “I don’t think younger people should be busting their neck to go and buy in the property market… like mum and dad did”, he suggests that rentvesting – that is, investing in property in an area you perhaps don’t want to live in, renting that property out, and then renting yourself in a place you want to live – might be the way to go.
Bouris posits this as a way for urban young professionals to maintain their lifestyle without bankrupting themselves in the process.
Sounds deceptively simple, but why do it at all? It’s all got to do with our “wage recession”, Bouris argues.
“While interest rates have gone from 17% to 2.5%, the purchase price has gone from $500,000 to $1.5 million, so that’s the issue… if your wages have not increased, the amount of money you can borrow is a lot less than the purchase price, so it’s never keeping pace.”
“So, you’ve got to say, ‘what does my wage allow me to save and keep pace?’ Look at that amount of money and that’s got to keep pace with the purchase price of a property which is not where you would ordinarily live… Buy where you can afford, rent where you want to live.”
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He also gave some New South Wales locations by way of an example: “if you want to live in Paddington, go rent. If you want to buy… buy in Lismore, Ballina, regional, wherever you are, Orange, I don’t care – just get onto the property market.”
Of course, there are two big issues here. One, this will only increase the squeeze on regional property prices and supply that regional Australia has been sharply experiencing over the last two years. City dwellers who are finding themselves priced out of their home towns will now start pricing regional Aussies out of their home towns.
Secondly, Bouris points out that it’s a risky idea buying property in an area you’re not familiar with. He does offer some advice on that note, too: “all the real estate agents are on social media. Follow them, see what they’re saying, ring them up, do your research.”
RELATED: Why Australian Home Buyers Shouldn’t Be Scared Off By ‘The Hemsworth Effect’
The alternative, of course, is just to go off the grid in Far North Queensland, or throw all your money into crypto and hope for the best (note: that’s actually a terrible idea).
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The post Australian Money Guru Explains Why You May Be Better Off Renting Than Buying appeared first on DMARGE.
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