» Generation Y

Property investment habits of the different generations

BMT team — Wed, 20 Feb 2019 05:40:26 +0000

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 Generation X Baby Boomers What these trends mean for each generation 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.

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Property trends for Gen Y Australians

BMT team — Tue, 04 Apr 2017 23:50:27 +0000

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.

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Investors of all ages reaping the benefits

BMT team — Thu, 10 Dec 2015 03:23:24 +0000

A recently released 2015 Domain Consumer Insights Study suggests that investing in property is a pastime of Australians of all ages. One in five Australians own investment properties and while many might assume that the majority of investors who make up this statistic are baby boomers, this couldn’t be more untrue. The Domain report found that the number of Generation Y’s who own multiple investment properties is now on par with Baby Boomers. 16 per cent of Generation Y’s own two or more properties compared with 17 per cent for both Baby Boomers and Generation X’s. The report also found that the age Australian’s are buying investment properties is getting younger, with the average age of investor purchasers sitting at thirty four years of age. While this is the average, those Generation Y investors who become investment property owners generally do so at the young age of just twenty five. The average age for purchasing an investment property for those who belong to the Generation X category is thirty five years, while for Baby Boomers the average age that they became property investors was forty five. However, the report shows that a significant number of Generation Y’s are still living at home with Mum and Dad, with 26 per cent of those who fall into this category living at home. Future investment in property also looks set to have a bright forecast, as almost half of those planning to invest over the next three years will be first time investors purchasing for the first time. With such significant numbers purchasing or planning to purchase an investment property, it will become even more important for investors to take advantage of the tax depreciation benefits available from these properties. 80 per cent of investors still fail to claim the maximum depreciation deductions for their investment property. Yet it is as simple as obtaining a comprehensive depreciation schedule outlining the available deductions to make sure all the benefits from a property are received come tax time. Investors who would like more information about the depreciation deductions available in their property can speak to one of BMT’s expert staff on 1300 728 726 or they can request a quote online. To read a press release from Domain about the study and download their full fact sheet visit: www.domain.com.au/group/press_release/property-moguls-australian-property-investors-starting-young/.

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