Sydney’s real estate market has long been a dream and a nightmare rolled into one. For many first-home buyers, the idea of owning a home in Australia’s most iconic city seems more like an uphill battle than an achievable goal. With skyrocketing property prices, rising living costs, and increasing mortgage stress, is buying a home in Sydney really the right decision for new buyers from Gen Y and Gen Alpha?
Before you commit to a million-dollar mortgage, let’s take a deeper look at why buying a first home in Sydney might not be the best financial move—and why rentvesting could be the smarter alternative.
Facing The Harsh Reality– Homeownership in Sydney is an Uphill Battle
1. It’s Nearly Impossible for Gen Y and Gen Alpha to Enter the Market
According to CoreLogic’s Home Value Index, the median house price in Sydney has surged past $1.3 million. For young Australians just starting their careers, saving for a deposit and qualifying for a mortgage has never been harder.
The reality is that many Gen Y and Gen Alpha buyers are locked out of the market because:
• Wages have not kept pace with property price growth.
• The average 20% deposit required for a median-priced home is over $260,000, an amount unattainable for most young professionals.
• Banks have tightened lending criteria, making it harder for first-home buyers to get approved for a home loan.
2. Rising Costs of Living Add More Financial Stress
Sydney is one of the most expensive cities in the world to live in. Beyond just home prices, the cost of groceries, utilities, and transportation continues to rise, putting more financial pressure on residents.
A recent report shows that household spending has increased by 7.3% year-on-year, with essentials like food, fuel, and rent seeing major price hikes. If you stretch your budget to buy a home, you may find yourself struggling with day-to-day expenses, limiting your lifestyle and financial flexibility.
3. A $1M+ Home Still Comes with Commute Challenges
Spending over a million dollars on a home in Sydney doesn’t guarantee a great lifestyle. Many affordable homes are located in outer suburbs, where public transport infrastructure is lacking, and daily commutes into the city can take well over an hour each way.
Some cities have a public transport system that is under immense strain, with overcrowding and delays worsening year after year. Many first-home buyers who move to the outer suburbs find themselves spending excessive time and money on transport.
4. Larger Deposits Make Homeownership Unattainable
As property prices continue to rise, so does the deposit required to secure a home loan. According to a recent study, the typical first-home buyer in Australia currently needs to save approximately $134,841 for a 20% deposit to enter the property market.
If you’re renting while trying to save for a deposit, the high cost of Sydney’s rental market makes it even harder to put money aside. This forces many first-home buyers into financial hardship before they even get the keys to their new property.
5. Repaying a Large Home Loan Takes Decades
A standard home loan term in Australia is 30 years, meaning most new buyers are committing to three decades of repayments. On a $1.3 million home loan, mortgage repayments can easily exceed $7,000 per month at current interest rates (around 6% per annum).
This means:
• Less disposable income for travel, leisure, or investing.
• Increased financial stress due to the long-term debt commitment.
• Risk of financial instability if interest rates rise further.
The Smarter Alternative: Rentvesting
Instead of stretching your finances to buy an overpriced home in Sydney, a smarter alternative is rentvesting—renting where you want to live while investing in more affordable properties elsewhere in Australia.
1. Live Where You Like Without the Stress of a Mortgage
By choosing to rent in a desirable location rather than buy, you can enjoy the lifestyle you want without the financial burden of a massive mortgage.
For example:
• You could rent a beautiful apartment in Sydney’s inner city for $800 per week rather than buying a small home in the suburbs for $1.3 million.
• You avoid the financial pressure of property maintenance, council rates, and mortgage stress.
• You have the flexibility to move if your job or lifestyle changes.
2. Start Small and Scale Up
Instead of putting all your money into one expensive Sydney home, you can invest in multiple, affordable properties in high-growth regional markets.
For example, instead of saving $250,000 for a Sydney home deposit, you could use that money to buy two or three investment properties in cities like Brisbane, Adelaide, or Perth, where median home prices are still under $700,000.
3. Success Story: How One Young Couple Built a $240,000 Equity Portfolio
Take the case of one of our clients—a young couple from Sydney who decided to take the rentvesting approach.
• Instead of buying their first home in Sydney, they continued living with their parents and saved aggressively.
• They used their savings to buy three investment properties in high-growth areas.
• Over five years, the value of their properties appreciated by a combined $240,000.
• Today, they have the option to either cash out and buy their dream home or continue scaling their investment portfolio.
This strategy allowed them to enter the property market without taking on crippling debt.
Final Thoughts– Reconsider the “Great Australian Dream”
The idea that you must buy a home in Sydney to be successful is outdated. With rising home prices, high living costs, and the burden of a 30-year mortgage, buying a first home in Sydney is not always the best financial decision.
Instead, rentvesting provides multiple benefits like financial freedom and lifestyle flexibility, the ability to invest in high-growth property markets, faster wealth accumulation without mortgage stress.
If you’re a first-home buyer struggling to enter the Sydney market, consider rentvesting as your path to financial success. You don’t have to own the home you live in—you just need to own the right investments that build your wealth over time.
