Has Labor’s tax reform killed ‘rent-vesting’ for young Australians seeking a foothold in the housing market?

Rent-vesting – a popular strategy used by young Australians to save for their first home – could be killed off by Labor’s tax changes on investment properties, experts warn. Renters have used the strategy to keep living in their preferred area while buying a cheaper property elsewhere, hoping it will rise in price so they can sell and put the profits towards their first home. It has boomed in popularity as young Australians struggle to break into an unaffordable housing market. But higher capital gains tax and the tight restrictions on negative gearing announced in Tuesday’s budget will make the method less attractive, according to Domain’s chief economist, Dr Nicola Powell. “It’s going to hurt … [and] their journey to actually buying a home and having it as a roof over their head might be delayed,” Powell said. “Rent-vesting is all about building up equity and releasing that gain to then eventually put into a home that you want to live in yourself.” Sign up for the Breaking News Australia email The typical Australian home now costs eight times more than the typical income after years of soaring prices, according to property data firm Cotality. It would take 11 years to save a 20% deposit. Tuesday’s tax reforms, aimed at cutting investors’ competition for housing, are expected to help an extra 75,000 renters buy their first home in the coming decade and leave house prices 2% lower than they otherwise would have been. …