Stay-Vesting: A Growing Trend Among First-Time Homebuyers
In the face of skyrocketing property prices and dwindling affordability, many first-time homebuyers are turning to a strategy known as “stay-vesting” to enter the housing market. This involves living with parents for an extended period to save on rent and boost borrowing capacity, enabling the purchase of investment properties as a stepping stone toward eventual homeownership.
Gina Lim, a 35-year-old from Sydney, exemplifies this trend. Unable to afford a home in her preferred suburb, Lim chose to live with her parents, boosting her borrowing power from $450,000 to $550,000. This allowed her to buy a one-bedroom property in Mosman, a decision she describes as financially pragmatic though personally challenging. “Obviously, no one wants to be 35 and living at home, but you’ve got to do what you’ve got to do, right?” Lim told Chris Chang, shedding light on the sacrifices involved in stay-vesting.
The strategy offers considerable financial benefits, according to experts. James Kirkland of Little Real Estate notes an increase in first-home buyers at property inspections intended for investors, particularly in Queensland. “It probably allows them to buy property in a slightly better location than they otherwise would be able to,” says Kirkland, highlighting the enhanced borrowing capacity that stay-vesting provides.
However, the approach is not without its drawbacks. Sally Tindall, data insights director at Canstar, warns of the potential pitfalls such as missing out on government grants and concessions available to owner-occupiers, and the complexities involved with selling investment properties due to capital gains tax. “If [you’re thinking] five years’ time, think about what your needs might be in five years and make sure that property is going to cater for those needs,” advises Tindall.
Despite these challenges, the strategy can be financially rewarding. Buyers agent Lloyd Edge cautions that while this may allow entry onto the property ladder, the quality of the investment should not be overlooked. “Buy in good locations that make sense from an investment perspective … [a property] might be cheap for a reason,” Edge explains, stressing the importance of careful property selection.
For some, like Brisbane resident Leila D’Rose who has purchased three investment properties while living with her parents, stay-vesting is a long-term sacrifice for financial advancement. “It’s a sacrifice you make to get ahead,” D’Rose shares about her experience, which has even led her partner to move in with her and her parents.
As more Australians like Lim and D’Rose navigate the complexities of the housing market, stay-vesting continues to be a viable, though challenging, strategy for those looking to make their first foray into property ownership. As Lim puts it, opting for the ‘harder’ route now may well pay off in the future, echoing a sentiment of cautious optimism among stay-vestors.
References:
Melissa Fisher
Founder, Acuity Development Group & The Right Team