A DEBATE between Sunrise hosts David Koch and Natalie Barr on Thursday about the merits of renting versus buying a property got just a little bit awkward.
Finance guru Koch was advocating the merits of so-called "rent-vesting", whereby property hunters rent where they want to live and buy an investment property where they can afford.
Here's how the exchange went down.
Koch: "Nat, it isn't a bad way of doing it."
Barr: "One question. Do you know anyone who's actually done that and actually put all that money away?"
Koch: "Yes. Yes."
Barr: "One person?"
Koch: "I have a mate who has only ever rented and owns five investment properties. I have another person ..."
Barr: "OK, there's one. Any more? Just checking."
Koch: "Some of my kids' friends have done it because they can't afford to live where they want to live so they rent there, and they've bought an investment property and another house ... because of course if you negatively gear the rental property, the difference is tax deductible. On your mortgage repayments, they're not deductible."
Barr: "But they're negatively geared ... so in this market they're losing money, in this climbing Sydney market?"
Koch: "No, no, no, only losing money on the cash. Trust me, Nat, I actually know a bit about this. I know about this, I've done all the calculations, you can throw all the hand grenades you like, but it works."
Barr: "I'm just checking, because it's a climbing Sydney market, so would they have lost money in this market? Who loses money in this last five years in Sydney in the property market?"
Koch: "Last month. Last month. What about Perth? What about Perth? You're not going to win, sorry, Nat."According to LJ Hooker - which, believe it or not, has trademarked the term "rentvestor" - the trend of renters owning their own rental properties has exploded in popularity since 2013.
"Contrary to common perceptions that a rentvestor is a young professional or university student, our survey found that a diverse age group rentvest," LJ Hooker head of research Matthew Tiller said at the time.
But a recent survey by Mortgage Choice found more than half (57 per cent) of Australians believe the "rentvesting" trend actually spells the end of the Great Australian Dream, and only a quarter said they would be happy to rent for most, if not all of their lives.
Mortgage Choice chief executive John Flavell argued that while not ideal, first homebuyers needed to adjust their expectations.
"While people are clearly keen to own property, it would seem they are still attached to the idea of living in that property and not renting it out," Mr Flavell said.
Over the past five years, dwelling prices in Sydney and Melbourne have skyrocketed in value by about 75% and 50% respectively.
A growing number of younger Australians fear they will be locked out of home ownership indefinitely as part of "generation rent".
While there are signs the current property cycle has peaked - CoreLogic figures showed house prices across the capital cities fell by 1.1% in May - failing a big drop in prices, places such as Sydney and Melbourne will remain near the top of lists of world's most unaffordable cities.
It comes as veteran real estate agent John McGrath joined a growing chorus of experts to call the peak of the bull run in Australia's two biggest markets, but said prices were not on the "edge of a cliff".
"The simple fact is [a crash] hasn't happened and it won't happen," he told The Australian.
"Could there be a bit of a correction for a short period? Yes, but I don't see it as being significant.
"Property sellers will have to pay close attention to their local market to ensure that they don't over-estimate their property's value as the market calms down.''
At its June meeting this week, the Reserve Bank left the official cash rate on hold at its record low of 1.5% marking the 10th month since the last change. The RBA cut the cash rate in August, following an earlier cut to 1.75% in May last year.
Last month, investment bank Citi predicted house prices could fall by as much as 7% over the next two years in a "partial correction".
It came after an earlier warning in which UBS called the top of the housing cycle, but stopped short of predicting large price falls.
AMP Capital chief economist Dr Shane Oliver said the latest CoreLogic data "adds to evidence that the peak at least in terms of momentum" had been seen.
"The drip feed of negative news regarding the Sydney and Melbourne property markets - bank rate hikes, APRA moves, surging unit supply, tightening conditions for investors and foreign buyers (with NSW moving again on foreign buyers in the last week), constant warnings of a bubble about to burst - is starting to impact," he said in a note this week.
"Overall our view remains that the peak in home price growth in Sydney and Melbourne has been seen and that further weakness lies ahead with ultimately a 5 to 10 per cent average decline and that unit prices in parts of Sydney and Melbourne will fall by 15-20%.
"In the absence of much higher interest rates, much higher unemployment and a generalised oversupply a property crash (say a 20%-plus fall in average home prices is unlikely).
Of course it's dangerous to generalise across Australia - Perth property prices are probably getting close to the bottom and Brisbane and Adelaide prices are likely to continue meandering along at around 3 per cent year on year."
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