Over a lifetime your financial position and priorities develop and change.
The typical pathway starts with saving, accumulating wealth in your working years, and then spending your retirement enjoying the results of your hard work.
To provide some insight of how behaviours and priorities change over time, we’ve taken a look at the property investment habits of Generations Y (Millennials), X and Baby Boomers.
In this article we will look at:
Millennials (born between 1981 and 1996)
According to Macquarie Bank’s June 2017 Australian Macro Strategy, Millennials make up 29 per cent of the Australian population at 7.1 million people.
In recent years it has become more difficult for first home buyers to afford a home, prompting many young Australians to look for alternative ways to enter the property market.
A trend which has continued to grow in popularity is rentvesting. This involves individuals renting in their dream suburb, while buying or investing elsewhere in a market more achievable for their budget.
By rentvesting, investors can take their first steps in entering the property market and maintain their desired lifestyle without forgoing their real estate dreams. This method provides young investors with an opportunity to build equity and achieve capital growth, potentially allowing them to afford to buy their desired home down the track or even invest more widely.
To learn more about rentvesting, read our Maverick article ‘There’s a way Australians of all ages can benefit’
Generation X (born between 1965 and 1980)
Most Gen Xers’ have gained enough experience during their careers to now afford them the opportunity to earn higher incomes and successfully accumulate some wealth. This places Gen X’ers in their prime money-making years.
However, they also experience more financial pressure, including mortgages, HECS debts, childcare, education expenses and their determination to find a balance between building up a large nest egg and keeping funds accessible for living costs before retirement.
According to the CoreLogic Housing Affordability Report 2017, 19 per cent of Gen X own an investment property.
The report also highlighted investment properties are more likely to be owned by families with children living at home. 22 per cent of those with children aged five to seventeen own an investment property, followed by 18 per cent of those with children aged under four years old and 17 per cent of those with children over eighteen. This indicates owning an investment property is a popular strategy for Gen Xers’.
Baby Boomers (born between 1946 and 1964)
Australia’s Baby Boomers (those born between 1946 to 1964) have benefitted from decades of economic growth and increasing house prices.
Although rising life expectancies and the pressure to help older and younger relatives can affect their finances, they know they need to protect the wealth they’ve built up over the years and diversify their investments to help fund their retirement. As a result, there are a couple of investment habits which have emerged from the Baby Boomer generation.
Firstly, many Baby Boomers have bought an investment property by leveraging the equity they have in their principal place of residence. Secondly, downsizing has become a popular habit of retirees.
Baby Boomers also tend to be highly informed about property investment opportunities and how they can fund their investment strategy through taxation incentives, such as negative gearing and claiming property depreciation.
What these trends mean for each generation
To achieve the dream of property ownership, the 2017 CoreLogic Report indicates 46 per cent of Millennials who currently rent are prepared to dedicate between 30-50 per cent of their gross household income to service a mortgage, compared with 42 per cent of Gen X and 36 per cent of Baby Boomers.
30 per cent of Baby Boomers are also more likely to consider a regional town to purchase an investment property compared with 21 per cent of Millennials and 22 per cent of Gen X.
The report shows Millennials who rent are significantly more likely to consider buying an investment property than other generations, with 51 per cent stating they would buy something they would not personally live in first, compared with just 33 per cent of Gen X and 24 per cent of Baby Boomers.
Whether you’re new to property investing or you’re a seasoned investor, practicing solid property investment habits is the key to success.
If you’re considering buying an investment property, take advantage of depreciation claims by ordering a depreciation schedule.
To discover what you can claim, use the free BMT Tax Depreciation Calculator to generate a depreciation estimate for any property.
Alternatively, contact one of our expert staff on 1300 728 726 for a free estimate of available deductions.