One in four Aussie first-home buyers considering the rentvest gamble.
Australia’s average home loan size has surged more than $50,000 in a year to a record breaking $661,520 that’s underpinned home price upticks nationwide.
It comes as almost a quarter of Australia’s would-be first-home buyers are now considering becoming a landlord before a homeowner.
That cohort of buyers is gambling a home they can afford today will one day be worth enough to help them buy where they actuallywant to live — a trend being led by Victoria and NSW.
Mortgage Choice’s latest Home Loan Report has found the nation’s typical loan is now sitting at $661,520 after its mammoth, $50,992 (8.4 per cent) jump compared to the same time a year ago — growing faster than home values did in the same time.
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It was led by even bigger surges in Western Australia which had an 11.8 per cent jump to $588,010, as well as South Australia, where new mortgages are 10.6 per cent higher at $635,664 — the first time the state has topped $600,000.
Queenslanders are also borrowing harder, with mortgages rising 9.7 per cent to $622,953.
While more modest growth was notched in NSW, up 6.4 per cent, it is home to the nation’s highest average mortgage at $752,914, followed by Victoria at $652,999, after a 4.6 per cent increase in the past year.
The report also found 24 per cent of would-be first-home buyers are now open to making their first purchase an investment property.
The Mortgage Choice Home Loan Report reveals what Aussies are borrowing.
Victorians were the most likely, with 40 per cent of survey respondents saying they would consider becoming a landlord ahead of a homeowner, followed by NSW where 27 per cent had the same view.
Mortgage Choice chief executive Anthony Waldron said for the majority who were thinking about it, the goal was that it would help them build equity so they could eventually purchase their first home to live in.
Others indicated a general desire to build wealth, get a stake in the market before prices rose further or being unwilling to relocate from where they live.
“Many first-time buyers are turning to investment properties as their way to get their foot on the property ladder,” Mr Waldron said.
Mortgage Choice chief executive Anthony Waldron said many first-home investors were hoping to turn investing in property into their dream home in the future.
It comes as Mortgage Choice data shows investor loans rose in value by 34 per cent in the September quarter this year, outpacing an 18.6 per cent uptick for owner occupiers.
Real Estate Buyer’s Agents Association of Australia president Melinda Jennison said with interest rate cuts in the past year, a rise in loan sizes showed Aussies were being forced to borrow more to chase the market — as their wages, especially for first-home buyers, had not grown at the same rate.
“A lot of people are priced out of purchasing a home based on the location of where they live and they are grounded by employment or family,” Ms Jennison said.
“Whereas for those who rentvest, it does make sense so you don’t get cut out of the market — it’s an affordability-based decision.”
However, the professional homebuyer did warn those considering it that they need to be aware of who was providing them with advice on housing type and locations if they were looking at areas they were not familiar with.
REBAA president and buyers agent Melinda Jennison said rentvesting was a way to embrace the property market for those who couldn’t afford to buy where they wanted to live.
PropTrack’s September Home Price Index showed the percentage growth in values nationwide was less than for loan sizes, with a 6.24 per cent uptick across all dwelling values.
Real Estate Institute of Australia president Leanne Pilkington said the surge in home loan sizes was no surprise.
“A lot of people do borrow to their capacity,” Ms Pilkington said.
“They can see that extra $50,0000 would allow them to move to an area they couldn’t otherwise afford, or get an extra bedroom.”
However, while she said it was good to see first-home buyers would be open to rentvesting, a “smart move”, a trend that was likely to grow, government policy shifts aimed at helping them buy a home to move into could prove tempting for many.
The report’s national survey with 1000 responses also found would-be investors are underprepared, with less than a third having confirmed their borrowing capacity or set a budget.
Real Estate Institute of Australia president Leanne Pilkington was unsurprised borrowing has surged in the past year.
Separately, more than half of Australians still want a human involved in negotiating their loan with a lender, rather than trusting the process to AI, while a similar share want the process explained to them by a person, too.
However, there are signs they are comfortable with using AI for some borrowing tasks, such as comparing lenders and getting estimates on what they might be able to borrow, with close to a third open to the computers handling both tasks.
“Consumers want a broker’s support throughout the home buying journey – particularly for the parts of the process that require nuance and trust, such as negotiations, providing detailed explanations and personalised advice, and completing home loan reviews – for example, when refinancing,” Mr Waldron said.
The report also found demand for fixed home loan rates declined by more than a third, while requests for variable ones rose by more than a quarter.
Additional findings include that Aussies are still minding their money, with 70 per cent indicating they’d made sacrifices in the three months ending at September 30, compared to 65 per cent for the same timeline to June 30.
The Mortgage Choice Home Loan Report reveals how Aussies are paying their mortgages.
The biggest budget savers were cutting back on eating out, a tactic used by 37 per cent of surveyed households, skipping movies and concerts, 35 per cent, reducing clothing and gadget purchases, 31 per cent, and even delaying or cancelling holidays, 26 per cent.
Almost one in five admitted to using emergency funds or savings to cover home loan repayments, while one in 20 had to take on a housemate or sell up so they could downsize their mortgage.
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