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Top rentvest markets for a budget of $500k to $800k

  • April 05 2022
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Invest

Top rentvest markets for a budget of $500k to $800k

By Noemi Pamintuan-Jara
April 05 2022

As house prices continue to skyrocket and government schemes expire, young workers with a tight budget are looking for new options to break into the property market.

top rentvest markets for a budget of 500k to 800k

Top rentvest markets for a budget of $500k to $800k

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  • April 05 2022
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As house prices continue to skyrocket and government schemes expire, young workers with a tight budget are looking for new options to break into the property market.

top rentvest markets for a budget of 500k to 800k

First home buyers in Sydney and Melbourne face the dilemma of being pushed to the suburbs if they want to purchase a house, or they have to make do with a unit if they prefer to live in a city more accessible to their workplace.

Commenting on the limited options available to young home buyers, Well Home Loans chief executive Scott Spencer said this target group is left “having to choose between buying an inner-ring or middle-ring unit – which might not suit someone who is planning to start a family – or buying a house on the city fringes – which can be hard if you have to commute to the CBD every day.”

To address this dilemma, Well Home Loans has commissioned research firm Suburbtrends to look at fresh options that could help first home buyers hop onto the property ladder.

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According to the study, first-time home buyers in Sydney and Melbourne with a budget of $500,000 to $800,000 could be better off renting units in appealing suburbs and buying high-growth investment houses in regional areas or interstate through “rentvesting”.

Explaining what rentvesting means, Mr Spencer said it’s a strategy where “buyers rent a unit in their dream suburb and buy a house for investment purposes in a cheaper market with long-term growth potential”.

Mr Spencer has noted that the objective is to get your foot on the property ladder while living in a suburb that meets your needs and wants.

“At some point in the future, you might be able to use the equity from your investment property to buy the house you always wanted in Sydney or Melbourne,” he explained.

To filter the list, researchers picked out suburbs where there is downward pressure on weekly rents and house prices for locations identified as “better to rent than buy”.

The process was done using these data points:

  • Vacancy rates are above 1.5 per cent (for both the suburb and the SA3 in which it’s located)
  • Yields are below 4 per cent
  • Over the previous 10 years, median prices for units have grown at less than half the rate of houses

Furthermore, many more apartments are likely to be built in these areas in the coming years, putting further downward pressure on rentals and prices.

For suburbs identified as “locations to consider buying a house”, researchers focused on these data points:

  • Yields are above 3.5 per cent
  • Inventory levels are less than five months
  • The SA3’s median house price has grown by an average of at least 5 per cent per annum over the past 10 years

Additionally, in the coming years, it is unlikely that a considerable number of new residences will be developed in these suburbs. Therefore, increased demand would result from a lack of supply, putting increasing pressure on rents and prices.

Finally, when comparing unit markets where it is preferable to rent against house markets where it may be better to buy, researchers looked at the unit markets that have double the inventory as the home markets.

When it comes to rentvesting, Mr Spencer concluded with a reminder to home buyers to act prudently since the decision of where to live and buy is both an emotional and financial decision.

“So first home buyers should weigh up both those factors when deciding whether to follow the traditional owner-occupier path or choose the increasingly popular rentvesting option,” he concluded.

Here are the results of the study listing the top 30 suburbs where investors can rent in the city and buy a house in a high-growth area grouped according to price points:

$500k to $600k budget

10 NSW and Victoria suburbs where it’s better to rent a unit than buy a house

State 

Suburb

Median sale price for units

Vacancy rate for units

Median weekly rent for units

NSW

Wentworthville

$560,000

5.4%

$420

NSW

Auburn

$550,000

2.7%

$400

Vic

Box Hill

$522,000

5.2%

$390

Vic

Doncaster

$598,000

4.3%

$430

Vic

North Melbourne

$595,000

4.0%

$380

Vic

Maribyrnong

$545,000

3.8%

$380

Vic

Hawthorn East

$580,000

3.6%

$395

Vic

South Yarra

$588,000

3.5%

$420

Vic

Abbotsford

$560,000

3.0%

$400

Vic

Brunswick

$595,000

2.5%

$400

10 suburbs where houses are in the same price range as NSW and Victoria units for rentvesting

State 

Suburb

Median sale price for units

Vacancy rate for units

Median weekly rent for units

WA

Darling Downs

$506,000

0.0%*

5.7%

Qld

Nambour

$585,000

0.5%

4.4%

Tas

Sorell

$561,000

0.9%

4.4%

Tas

Mornington

$571,000

1.0%

4.3%

Tas

Oakdowns

$595,000

0.0%*

4.1%

Tas

Brighton

$580,000

0.6%

4.0%

NSW

Goulburn

$529,750

0.7%

4.0%

NSW

Cringila

$595,000

1.1%

4.0%

Qld

Kippa-Ring

$580,000

0.4%

3.9%

Tas

Bagdad

$585,000

0.0%*

3.8%

NOTE: *When a suburb has a vacancy rate of 0 per cent, that doesn’t mean the suburb literally has no vacant rental properties. Rental properties are regarded as “officially” vacant when they’ve been on the market for 21 days or more. When a suburb has a vacancy rate of 0 per cent, it means all rental properties are being filled in less than 21 days of being listed for rent.

$600k to $700k budget

10 NSW and Victoria suburbs where it’s better to rent a unit than buy a house

State

Suburb

Median sale price for units

Vacancy rate for units

Median weekly rent for units

NSW

Toongabbie

$646,033

4.8%

$420

NSW

Canterbury

$680,000

2.7%

$450

NSW

Hurstville

$679,000

1.6%

$460

Vic

West Melbourne 

$660,000

6.2%

$390

Vic

Moonee Ponds

$648,000

5.6%

$390

Vic

Williamstown

$690,000

3.8%

$400

Vic

South Melbourne

$660,500

3.6%

$430

Vic

Caulfield North

$666,000

3.6%

$410

Vic

Glen Iris

$622,500

3.3%

$400

Vic

Armadale

$637,000

3.2%

$420

10 suburbs where houses are in the same price range as NSW and Victoria units for rentvesting

State

Suburb

Median sale price for houses

Vacancy rate for houses

Median yield price for houses

Qld

Coombabah

$660,000

0.3%

4.3%

Tas

Midway Point

$609,000

0.0%*

4.3%

Qld

Meridan Plains

$672,500

0.7%

4.3%

Qld

Caloundra West

$677,000

0.9%

4.2%

Qld

Lower Beechmont

$630,000

0.0%*

4.1%

Tas

South Arm

$642,000

0.0%*

4.0%

NSW

Edgeworth

$650,000

0.8%

3.9%

NSW

Koonawarra

$625,000

0.7%

3.9%

Qld

Rothwell

$600,000

0.2%

3.9%

Tas

Warrane

$600,000

0.0%*

3.9%

NOTE: *When a suburb has a vacancy rate of 0 per cent, that doesn’t mean the suburb literally has no vacant rental properties. Rental properties are regarded as “officially” vacant when they’ve been on the market for 21 days or more. When a suburb has a vacancy rate of 0 per cent, it means all rental properties are being filled in less than 21 days of being listed for rent.

$700k to $800k budget

6 NSW and Victoria suburbs where it’s better to rent a unit than buy a house

State

Suburb

Median sale price for units

Vacancy rate for units

Median weekly rent for units

NSW

Ryde

$725,000

3.7%

$460

NSW

Carlingford

$760,000

3.6%

$480

Vic

Heidelberg

$710,000

5.0%

$398

Vic

Malvern East

$720,000

4.1%

$360

Vic

Clayton

$750,000

3.9%

$410

Vic

Oakleigh

$765,000

3.8%

$395

10 suburbs where houses are in the same price range as NSW and Victoria units for rentvesting

State

Suburb

Median sale price for houses

Vacancy rate for houses

Median weekly rent for houses

Qld

Highland Park

$787,000

0.3%

4.4%

Qld

Merrimac

$770,000

0.1%

4.3%

Qld

Little Mountain

$780,000

0.2%

4.1%

Qld

Forest Glen

$794,000

0.0%*

4.1%

Qld

Nerang

$705,000

0.1%

4.1%

Qld

Pacific Pines

$775,000

0.3%

4.0%

Qld

Bli Bli

$769,000

1.0%

4.0%

Tas

Lauderdale

$725,000

0.0%*

3.9%

NSW

Mirrabooka

$755,000

0.0%*

3.9%

Qld

Sippy Downs

$770,000

0.4%

3.9%

NOTE: *When a suburb has a vacancy rate of 0 per cent, that doesn’t mean the suburb literally has no vacant rental properties. Rental properties are regarded as “officially” vacant when they’ve been on the market for 21 days or more. When a suburb has a vacancy rate of 0 per cent, it means all rental properties are being filled in less than 21 days of being listed for rent.

 

 
Top rentvest markets for a budget of $500k to $800k
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About the author

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Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

About the author

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Noemi Pamintuan-Jara

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

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