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Top five rentvesting areas can counter affordability issues

Two highly regarded property authors and industry experts recently turned their data analysis skills to identifying five of the best rentvesting locations in Australia.

Vaucluse, Port Hedland, Mount Coolum and Newport were among the fastest growing rents, while Casey City Council topped the charts as most potential for rentvestors.
Vaucluse, Port Hedland, Mount Coolum and Newport were among the fastest growing rents, while Casey City Council topped the charts as most potential for rentvestors.
Vaucluse, Port Hedland, Mount Coolum and Newport were among the fastest growing rents, while Casey City Council topped the charts as most potential for rentvestors.
Vaucluse, Port Hedland, Mount Coolum and Newport were among the fastest growing rents, while Casey City Council topped the charts as most potential for rentvestors.
Vaucluse, Port Hedland, Mount Coolum and Newport were among the fastest growing rents, while Casey City Council topped the charts as most potential for rentvestors.
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Vaucluse, Port Hedland, Mount Coolum and Newport were among the fastest growing rents, while Casey City Council topped the charts as most potential for rentvestors.

With rents and home prices rising rapidly and the market showing few signs of abating, more people are looking for affordable properties they can rent out to subsidise their own rental in a more affluent area.

Two highly regarded property authors and industry experts, Nicola McDougall and Kate Hill, recently turned their data analysis skills to identifying five of the best rentvesting locations in Australia.

The pair identified local government areas in each of the mainland state capitals.

Ms Hill, who is also a Qualified Property Investment Adviser (QPIA) and a property buyer at Adviseable, said rentvesting was a strategy that involved purchasing property in a more affordable location and continuing to rent the property you live in.

“As well as many young people moving to more affordable areas over recent years, rentvesting has become a popular strategy for those who want to buy property but still want to remain living in an expensive real estate city such as Sydney or Melbourne,” Ms Hill said.

“Renting continues to be more affordable than purchasing in desirable pockets of major cities, where buy-in prices can easily be millions of dollars and where many young people desire to live.”

“However, being a long-term renter without putting your money to work somehow has significant ramifications on your financial future as well as potentially causing hardship in retirement.”

Highest rental growth suburbs in 2021
Median rents and % increase in 2021

  Suburb Region Weekly rent % increase
1 Vaucluse Sydney $3,000 54.8%
2 South Hedland Pilbara $650 47.6%
3 Byron Bay Richmond-Tweed $1,100 46.7%
4 Port Hedland Pilbara $1,000 42.9%
5 Mount Coolum Sunshine Coast $725 42.2%
6 Coolum Beach Sunshine Coast $723 38.9%
7 Como Perth $650 36.8%
8 Peregian Beach Sunshine Coast $750 35.1%
9 Newport Sydney $1,150 33.7%
10 Beaconsfield Perth $610 32.6%

Source: Corelogic, Ray White. Restricted to areas with more than 50 observations.

No rent relief in sight

Australia ended 2021 with house prices up 21 per cent compared to the start of the year.

Ray White Chief Economist Nerida Conisbee said that while at this stage, it is looking like house price growth will continue, albeit at a slower pace, rental levels are set to accelerate. 

Rental increases were far more subdued than price growth in 2021, increasing on average by 6.7 per cent.

“It’s a great result for landlords, particularly given the more challenging conditions in 2020, but obviously far tougher for tenants.”

Ms Conisbee said the areas that have seen the most rental growth are linked to mining, particularly regional Western Australia, Perth and Darwin.

“All these areas saw sharp declines in rents following the end of the mining boom in 2013 but since the start of the pandemic have shot up again, although are yet to return to their peak.

“Interestingly, despite the strongest rental growth in Australia, Perth and Darwin have seen some of the slowest house price growth.”

House rental rates map

Source: Corelogic, Ray White.

According to new research by the Grattan Institute, most Australians still believe they will have their own home paid off by the time they retire, but that is no longer a certainty.

The research found that by 2056, the rate of homeownership for over-65s will have declined from about 76 per cent today to about 57 per cent.

Ms McDougall said the declining rates of homeownership may see more people spending their twilight years living in poverty.

“The research means young people in their 20s today may find themselves without a home to call their own in retirement, with many likely to be financially stressed if they rent, or even to suffer poverty,” Ms McDougall said.

Top five affordable rentvesting locations

  1. Casey City Council (Melbourne)

    Example suburb: Cranbourne

    Median house price – $657,000

    Rental vacancy rate – 1 per cent

    Ms Hill said the Victorian Government has identified several suburbs in the City of Casey, southeast of central Melbourne, to play a major role in service delivery and creating employment in its long-term planning document.

    “The area’s population growth rate during recent census periods was higher than other rapidly growing outer Melbourne municipalities - in fact, it’s growing at a rate more than twice the national average,” Ms Hill said.

    Local industries are diverse, which means the area is not dependent on only one industry.

    Ms Hill said about 60 per cent of locals live and work in the area and generally don’t commute into the CBD, which makes it an attractive lifestyle choice for families along with very affordable housing compared to most of Melbourne.

    “Casey City Council release land for development responsibly, and have done so thus far, keeping supply steady.

    “In spite of developments to cater for the growing population, the growth charts are steady, vacancy rates are generally low, and rents have been increasing steadily.”

  2. Moreton Bay Regional Council (Brisbane)

    Example suburb: Caboolture

    Median house price – $445,000

    Rental vacancy rate – 0.7 per cent

    From surging population to myriad major infrastructure projects, including a brand new university in Petrie and the redevelopment of Caboolture Hospital, the Moreton Bay region ticks many investment fundamental boxes for new and seasoned investors, Ms McDougall said.

    “A few years ago, Moreton Bay was classified as a priority growth area by the State Government, with its population predicted to hit half a million within about two decades,” she said.

    “Caboolture West is at the heart of a rapidly growing corridor north of Brisbane and is expected to eventually provide about 30,000 homes for around 70,000 people as well as generate close to 23,000 jobs,” she said.

    “The area will also have access to a number of primary and high schools as well as a TAFE and a private hospital.”

  3. City of Onkaparinga (Adelaide)

    Example suburb: Morphett Vale

    Median house price – $430,000

    Rental vacancy rate – 0.1 per cent

    Ms Hill said the City of Onkaparinga, incorporating Onkaparinga Hills, has strong population growth forecasts, coupled with affordable property prices, low vacancy rates and access to the central city.

    “The area also has an attractive seaside location, with a track record of steady price growth and above-average rental yields in one of South Australia’s strongest population growth areas,” Ms Hill said.

    “Over the next 20 years, the region is expected to receive an influx of 48,000 additional residents, making it one of Adelaide’s strongest growth areas.”

    Ms Hill said the region is a location that ticks a lot of boxes for rentvesters because it has lifestyle, affordability, improved transport links, economic growth drivers, population growth, and proximity to major jobs nodes.

    Investor purchase increase

    Source: Corelogic, Ray White.

  4. City of Stirling (Perth)

    Example suburb: Mirrabooka

    Median house price – $385,000

    Rental vacancy rate – 0.4 per cent

    Ms McDougall said the City of Stirling is one of four precincts in the Perth metropolitan area that led the recovery in the Perth property market two years ago, following the city’s multi-year real estate downturn.

    “Contributing to the region’s appeal are the shopping and education facilities, coupled with good transport links to the Perth CBD.”

    Ms McDougall said the City of Stirling is also the largest local government area in Perth, the largest local government by population in the state, and the second largest employment district in Western Australia after the Perth CBD.

    “Serious development began to occur there in the 1960s and 1970s as Perth expanded,” Ms McDougall said.

    “The City of Stirling has also initiated a project to improve the inland north-of-the-river suburbs of Balga, Dianella, Nollamara, Mirrabooka, and Westminster.

    “Generally, these suburbs can expect revamped town centres, improvements to transport, and higher-density housing.”

  5. Penrith City Council (Sydney)

    Example suburb: Kingswood

    Median house price – $790,000

    Rental vacancy rate – 1 per cent

    Ms Hill said Western Sydney is considered Australia’s third largest economy, with more than $22 billion earmarked to be spent on transport infrastructure, including ‘WestConnex’, Parramatta Light Rail, and Badgerys Creek Airport, over the next few years.

    “Employment in Western Sydney is expected to grow 47 per cent within the next 14 years,” Ms Hill said.

    “Penrith City Council and business organisations have seized the moment and are implementing plans to create 12,000 jobs by 2036.”

    “The precinct will be part of the $10 billion ‘Aerotropolis’ economic hub, delivering jobs, homes, infrastructure, and services.

    “In the past two years, Penrith’s property market received a ‘ripple effect’ from the growth in Sydney, with most suburbs experiencing double-digit annual growth in median prices in recent years.”

    Ms Hill said the area was ideal for rentvesters or homebuyers with slightly higher budgets.

    Penrith has a robust major infrastructure program, recorded population growth every year for decades, has diverse industries that keep its economy vibrant, as well as a more affordable property market that is incredibly active for both renters and buyers,” she said.

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