It seems like every day we hear in the media how young Gen Y Australians are struggling more than ever to get their foot on the property ladder.
But there are a few more interesting trends presently at play for this generation which don’t get talked about as frequently.
Here are five current property trends applicable to Gen Y Australians.
Gen Y property investors leading the way
While there may be fewer first home buyers than in past decades, Gen Y (those born between 1981 – 1994) Aussies are actually leading the way in property investing, despite affordability concerns.
The latest ING Direct Financial Wellbeing Index revealed that twenty two per cent of Gen Y own at least one investment property, compared to twenty per cent of Gen X (those born between 1963 and 1980) and nineteen per cent of Baby Boomers (those born in the decade following the end of World War II).
This could be attributed to changing markets conditions and buying trends, including the rise of rentvesting which is making it easier for young Australians to get on the property ladder.
Gen Y rentvestors
Rentvesting refers to those individuals who purchase an investment property in a place they can afford whilst renting in a place they would like to live, and has become popular with buyers as they try to negotiate a way to enter the market.
There are several benefits to rentvesting – aside from owning property – that have encouraged this trend, including:
- Lifestyle benefits – Rentvesting allows young Australians to have the security of an investment while living where they actually want to live, whether it be closer to the beach or city where there are more employment opportunities, lifestyle convinces and rent is often cheaper than mortgage repayments
- Flexibility – Rentvesting allows Australians the flexibility to relocate for new opportunities and provides extra discretionary funds to use for travel or education
- Tax benefits – By owning a property as an investment as opposed to a place of residence, rentvestors have access to tax benefits such as depreciation, which can lessen the expense of owning property
Read more on how rentvesting can benefit Australians of all ages.
Gen Y making sacrifices for home ownership
While Gen Y often get painted with the brush of being lazy and entitled, HSBC’s Beyond the Bricks study – which found that four in ten millennials globally own their own home – showed that this generation is willing to make big sacrifices to be able to afford a property.
The study found that fifty-five per cent of non-owners intending to buy would consider spending less on leisure and going out, thirty three per cent would consider buying a smaller than ideal place and twenty one per cent would even be prepared to delay having children to get their foot on the property ladder.
Furthermore, while older generations might say Gen Y have unrealistic expectations and want their first home to be their dream home, most Gen Y seem to happy with something a bit more basic that’s clean and simple, even if they have to bring it up to scratch themselves and work on it over time.
Renovation and DIY
This is supported by a 2015 study from renovation and design website Houzz, which found some interesting figures when it comes to home improvement and renovations.
Of the fifty six per cent of Australian home owners who undertook a home renovation in 2015, Gen Y was the group most likely to do so because it was the more affordable option. In fact, thirty six per cent cited affordability as the main reason for renovating as opposed to buying something else.
Additionally, Gen Y is the age group more likely to roll up their sleeves and get involved in home improvements themselves. While eighty five per cent of millennials hired professional help for renovations, they also wanted to get involved themselves and contribute with some DIY projects where possible, also with affordability concerns in mind.
Finances and the ‘Bank of Mum and Dad’
While Gen Y seems to be committed to home ownership and finding alternate ways to buy their first property, it doesn’t mean they’re not feeling the pinch of housing affordability.
According to HSBC, slow salary growth and house price inflation are the greatest barriers to millennials buying a home not just in Australia, but in the nine countries surveyed around the world including Canada, China, France, the United Kingdom, Malaysia, Mexico, the United Arab Emirates and the United States. And while it may not be stopping them from buying or investing, it may be deferring the dream or turning them towards alternate avenues such as rentvesting.
The survey found that of those planning to buy in the next five years (eighty three per cent), sixty nine per cent had not yet been able to save enough for a deposit while thirty four per cent were being held back because they could not afford the type of property they would like.
Furthermore, the study found that financial planning was somewhat lacking among this age group. Of those intending to buy a home in the next two years, thirty one per cent had no overall budget in mind while a further fifty four per cent only had an approximate budget in mind. And of those that had bought a property in the last two years, fifty six per cent of millennials overspent their budget.
Finally, Gen Y continues to get the help of their parents in achieving their home ownership goals, and this is not likely to change anytime soon. The study found that thirty six per cent of millennials who had bought a home in recent years had turned to the ‘Bank of Mum and Dad’ as a source of funding.