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Buying a Home vs Investing: What Young Australians Should Consider

The Great Wealth Debate

Owning a home has long been seen as a milestone of financial success in Australia. But for many younger Australians, the path to property ownership has felt increasingly out of reach.

High prices, slow wage growth, and rising living costs have made it harder to save a deposit. As a result, many have turned their focus to investing in the share market as a way to grow wealth in the meantime.

Now, with the Home Guarantee Scheme (HGS) expanded to allow eligible first home buyers to purchase with just a 5% deposit and no lenders mortgage insurance (LMI), the equation has changed again. The question isn’t just “should I buy or invest?”, it’s “is it finally possible to do both?”

How the Home Guarantee Scheme Is Changing the Game

In the past, saving for a 20% deposit could take years, particularly for single buyers or couples paying rent while trying to save. For example, saving $200,000 on a $1 million property might have taken six years or more of disciplined budgeting.

By lowering the required deposit to 5%, the HGS effectively shortens that timeline and gives first home buyers a clearer path to entering the market sooner.

However, as with any financial decision, accessibility doesn’t automatically equal suitability. While the scheme helps buyers get into the market faster, it also means borrowing more and increasing long-term interest costs.

The Case for Buying Property

There are clear benefits to entering the market earlier, especially if you’ve been priced out for some time.

Owning your home can offer:

🔹 Security and stability – avoiding rising rents and unpredictable lease renewals.
🔹 A sense of independence – you’re building equity in your own asset rather than someone else’s.
🔹 Potential capital growth – if property values rise, you benefit directly.

You’ll also start paying off your mortgage sooner, rather than continuing to rent for years while you save a larger deposit. In some cases, the savings on rent can even outweigh the additional interest paid on a higher loan amount.

However, property ownership also brings ongoing costs such as maintenance, rates, insurance, and the long-term commitment of a mortgage that can impact other financial goals.

For those not ready or able to buy, “rentvesting” can be a smart middle ground. This approach involves renting where you want to live, while purchasing an investment property in a more affordable location. It can offer many of the same benefits of property ownership, such as capital growth and equity building, without sacrificing lifestyle or location.

Like any investment, rentvesting requires discipline and a clear strategy. You’ll need to stay committed to your budget, maintain motivation to invest regularly, and seek professional advice to ensure your property and broader financial plan align with your long-term goals.

The Case for Investing in Shares

For some, flexibility and liquidity are more appealing than bricks and mortar. 

A diversified share portfolio can be started with far less capital than a property deposit, and it gives investors the freedom to adjust their strategy as markets and personal circumstances evolve. 

Investing can also: 

🔹 Help your money grow while you work toward other financial goals 
🔹 Provide passive income through dividends 
🔹 Build long-term wealth without the responsibilities that come with property ownership 

While investing offers significant benefits, it’s important to remember that all investments carry risk. Markets can move unpredictably, and returns are never guaranteed. 

One of the most important considerations when investing is your time frame. You need to think carefully about when you may need access to your capital, and how comfortable you are with potential fluctuations along the way. Different asset classes behave differently over time, and understanding this can help you make informed decisions that align with your broader financial plan. 

Can You Have Both? 

One of the biggest shifts created by the HGS is that owning a home and investing may no longer be mutually exclusive goals. 

With a smaller deposit requirement, some young Australians can now consider entering the property market while continuing to invest smaller amounts in shares or managed funds. This can help spread financial exposure across different asset classes, with one offering stability and the other flexibility and liquidity. 

However, it is important to understand the potential trade-offs. Several industry reports have noted that schemes designed to increase accessibility can also place upward pressure on property prices. If demand rises faster than supply, this can influence affordability and change the dynamics of the market. 

As with any major financial decision, the right balance depends on your income, expenses, and long-term priorities. Buying with a smaller deposit increases leverage, which can create pressure if interest rates rise or your circumstances shift. For others, it may provide a realistic way to enter the market earlier while still maintaining an investment foothold. 

What to Consider Before Making a Move 

If you’re torn between investing and buying, ask yourself: 

  1. What are my goals? 
    Are you looking for stability, or flexibility? 
  2. How secure is my income? 
    Can you manage repayments comfortably even if interest rates rise?
  3. Am I ready for long-term responsibility? 
    Property ownership comes with both financial and lifestyle commitments.
  4. Could I do both gradually? 
    Some investors choose to buy smaller properties first or invest in shares while saving toward a future purchase. 

There’s no universal right answer, only the solution that best supports your broader financial plan. 

Our Perspective 

Home ownership and investing both play important roles in building long-term wealth. What matters most is how each decision fits into your personal strategy, not just what’s trending in the market. 

At Poole Advisory, we help clients navigate these big decisions with confidence. Whether you’re saving for a deposit, building a share portfolio, or balancing both, we’ll work with you to create a plan that makes sense for where your wealth portfolio is now, and where you want it to be next. 

 

Compliance Disclaimer: 

This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns. 

Poole Advisory Pty Ltd ABN 15 642 040 604 is a Corporate Authorised Representative (No. 001282603) of Prosperitas Partners Pty Ltd ABN 30 662 654 453 AFSL 544 917  

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