Property investment by young people: Generation Y lead property investment charge
When it comes to property investment by young people and ‘generation bashing’ it is fair to say Generation Y, those aged between 18-34, cop a fair bit of flack for being unmotivated, fussy, soft and lazy.
But if recent data from the Australian Bureau of Statistics combined with other industry data is true, not only is Generation Y more clever than previous generations, they have also adapted a savvy new way to purchasing property called ‘rentvesting’.
According to the latest housing finance data from the Australian Bureau of Statistics the proportion of first-home buyers as a share of total home loans is languishing at its lowest levels in more than a decade.
First-home buyers made up just 10.2 per cent of all home loans in May 2016 and has since risen slightly to 13.7% in October 2016.
On the face of it looks like investors are slowly driving first home buyers out of the market, and if you believe the rhetoric in the media, young people like Generation Y will never be able to afford their own home.
Property investment by young people: ‘Rentvesting’
But if you scratch the surface a little more, you begin to see a very different picture. A picture that shows Generation Y making property investment as their first home, rather than buying a home to live in.
This picture is not being caught by the narrow definitions in Australian Bureau of Statistics data and can lead to overreach about young first home buyers not being able to get into the market by the general media.
The main reason why Generation Y is ‘rentvesting’ is not rocket science.
The more desirable properties are those that are generally inner city, near employment, transport and lifestyle choices and these properties are more expensive. Whereas properties that are a little further out from the CBD and employment and as a result are less expensive.
Turning this predicament to their advantage is exactly what Generation Y is doing. They are now buying investment properties as their first home while they are still at home with their parents or as they rent a place with friends that is more convenient for work and their lifestyle choices. Furthermore, they are then using these property investments as a stepping stone to drive inner city purchases later on in life.
Urban Money Lending Manager Geoff Wilson says, “More and more we are noticing young people wanting to find alternative ways into the property market. We have a number of customers who have purchased an investment property but chose to live else where as a way of getting into the market and then using it as a stepping stone to something more desirable later down the track.”
Recent research from ING DIRECT indicates 22 per cent of Generation Y in the country owning at least one investment property. Generation X follows closely behind with 20 per cent investing and Baby Boomers at 19 per cent.
“Despite questions about affordability Generation Y are quite savvy and are leading the investment pack,” Geoff added.
“My 27 year-old daughter is very much representative of Generation Y. She has a plan in place for the timing of significant moments, like buying property, better still they use online technology like Gum Tree and other Apps to earn and save money, making their financials goal even more achievable,” Geoff said.
The new data shows Generation Y understand the property market a lot better than the general public give them credit for and they are using the property market to their own advantage.