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Rentvesting gains traction amongst first-home buyers

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One in three first-home buyers prefers buying an investment property or rentvesting.

A growing group of first-home buyers is found to prefer investing in a home to buying one — a trend known as rentvesting.

A new research by the Property Investment Professionals of Australia (PIPA) revealed that one in three first-home buyers had opted to invest in property while renting over the past year.

PIPA chairman Peter Koulizos said the results of the study show that first-time property buyers generally have probably been more active over the recent years than official statistics originally recorded.

"The Australian Bureau of Statistics (ABS) publicly admitted issues with first-home buyer statistics from 2012 to 2016, in part due to some lenders only reporting loans to first-home buyers who received a First Home Owner Grant," he said.

ABS data showed that roughly 18% of homes financed in Australia in the month of September belonged to first-home buyers.

The study also indicated that a majority of first-home buyers (83%) chose to buy an existing property, despite government grants encouraging them to purchase a new dwelling. Only around 14% went to purchase a new or off-the-plan home. This preference is heavily influenced by affordability considerations — established properties typically have lower price tags than new ones.

Perhaps the softening market has made it easy for these new buyers to break into the market. However, accessing appropriate financing remains a challenge.

"It seems that the dream of property ownership has remained alive and well for some time, with many first-timers opting to improve their financial futures by investing in more affordable locations while renting elsewhere," Koulizos said.

For Koulizos, the results of the study can be a strong argument against the proposals to change negative gearing rules. He argued that investors usually prefer to buy existing properties.

"Established property has greater capital growth, and any tax benefits associated with new property generally doesn't make up for comparably poorer price performance over the long-term," he said.

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