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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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Emerging home ownership trends in Australia

BMT team — Mon, 16 Jan 2017 14:15:31 +0000

As the property market changes and evolves, so too does home buying and ownership trends. In response to the rising property prices in our capital cities over the past few years, alternative pathways to home ownership have developed and are becoming more prevalent. Commbank recently identified eight emerging home ownership trends which they say we should expect to see more of in the next fifteen years. While we’re not suggesting these methods of home ownership are or will be the norm, it’s interesting to note what changes and alternative pathways we might see in the future, stemming from current economic and social influences. Here are the eight emerging pathways to home ownership, as identified by CommBank. 1. Collaborative buying This trend suggests that current co-living situations will become more sophisticated and that advanced collaborative buying and living models will emerge. This includes “co-housing” which is when people either rent or own a smaller sized dwelling that is part of a larger development and has communal areas, whether it be a laundry, garden or dining area. Because these living spaces are smaller, they’re often more environmentally friendly due to more efficient land use, as well as more affordable. 2. Communities in common As mentioned above, more Developers are moving towards builds with shared areas. This particular trend goes a bit further by suggesting that individuals with similar values and lifestyles will band together and form a new type of community. Part of this home ownership trend is a decrease in the size of our properties. Downsizing is nothing new, but by 2030, it is predicted that new dwellings will be an average of 119 square metres – half the size of the average house in Australia today. You can read more about downsizing trends in Australian property here. 3. Group loans Co-ownership of property is nothing new but continues to grow in popularity, and the number of requests for split reports that we receive is testament to this. According to analysis from CommBank this home ownership trend is rising, with 67 per cent of applications in 2016 having two or more applicants. They also found that the number of single applicants for mortgages is decreasing. An increasing number of Australians are choosing to enter into a mortgage with a sibling, friend or trusted acquaintance, in addition to the more traditional choice of a partner or spouse. This growth seems to be in line with the rise of multi-generational living, which is a major social trend we’re seeing at the moment. 4. Joint ventures and syndicates We should expect to see a rise in group development models as another way to increase buying power. This is when acquaintances come together to enter the property market as one group and buy and develop blocks of land collectively. This is becoming more popular as new home buyers realise it can be cheaper to build several properties at once rather than one dwelling at a time, which has traditionally been the case. These joint ventures could be made up of friends, family members or even strangers who wish to band together to take advantage of a cheaper price. 5. Guarantor loans Guarantor loans – whereby parents or family members use their own property as security on a loan in order for their children to get into the housing market sooner – is nothing new, but is set to continue and even grow in line with our capital cities’ rising property prices. 6. Crowd housing This trend is all about Developers communicating directly with buyers about what they want, in order to meet that need and reduce settlement risk. Online crowd housing platforms are increasingly connecting homebuyers who share common interests with developers and architects, giving them a fair say in what type of property they would like to see built and what features they’d like included. With many in the industry predicting an apartment oversupply in some of our capital cities in the next few years, it will be interesting to see if this trend does become more prevalent. 7. Staircasing Staircasing occurs when a home owner buys a share in a property and gradually increases their share as their savings grow. This is new to Australia, but currently operates in other countries. The British Government has a staircasing scheme whereby homeowners can pay as much as they can afford – usually 25 to 75 per cent of the total value of the property – and gradually increase their ownership stake as their funds grow, eventually “staircasing” up to full ownership. However, the “Help to Buy” UK system has received some criticism with owners having limited rights, still being responsible for 100 per cent of maintenance and repair fees despite not owning 100 per cent of the property, and because of the issues that can occur if the owner wants to sell their share. 8. Guesthousing Part of the shared economy, this one refers to homeowners making their spare rooms or couches available to those in need of short term accommodation for a fee. This is already taking off in Australia with the growth of sites such as Airbnb. Read more about how Airbnb regulations are about to change in New South Wales.

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Five downsizing trends in Australian property

BMT team — Mon, 21 Nov 2016 01:12:09 +0000

It’s no secret that Australians have some of the largest houses in the world. While recent figures show a year on year increase in average floor size of our already large homes, our houses are actually not as big as they used to be. When you place these figures in a broader content and consider some current downsizing trends – as well as the rise in single person households – it makes you wonder if Australians are starting to embrace smaller homes. The stats Recent research from Commsec showed that in the past year the average floor space of a newly built home has increased 0.7 per cent to 231 square metres. Second only to the US whose houses are 10 per cent bigger than ours on average, Australian homes are 7 per cent larger than our New Zealand neighbours’ and 10 per cent larger than in Canada. While our houses are 10 per cent bigger than twenty years ago and 30 per cent larger than what they were in 1867, the current figure is actually down from our record of 247.7 square metres, which was recorded in 2008-2009. And interestingly, while there has been a slight increase in house size in the past year, our apartments are getting smaller. With an average floor space if 131 square metres, this is almost a 9 per reduction from 2004-2005 when the average size was 140 square metres. Alongside the common benefits of a reduced mortgage, reduced upkeep and cheaper utilities, people are starting to go smaller for a number of reasons, as we can see from several downsizing trends currently at play in Australia, which we have outlined below. 1. Sustainable property As our society becomes increasingly environmentally conscious, the demand for sustainable housing is growing. While still modern and comfortable, these houses have a green, thoughtful and efficient design, use recycled or sustainable building materials, aim to eliminate or reduce a carbon footprint during construction, foster a community feel and don’t take up more space than they need to. A good example of this is the award winning “The Commons” building in Brunswick (Breathe Architecture). The designer took everything not necessary out of the equation in order to reduce space and improve efficiency. This included, for example, a shared laundry instead of individual laundries and a communal bicycle storage room instead of a garage. With no air conditioning, these apartments rely on the building’s thermal efficiency and simple ceiling fans to keep cool. The Commons also promotes a community vibe with a shared veggie garden on the roof and other shared facilities. As sustainable building continues to grow in popularity, we should expect to see a reduction in houses that are big for the sake of being big, as there is no use for unwanted space in sustainable design. 2. Tiny houses Taking off in the US after proving to be a viable housing option following Hurricane Katrina, the tiny house movement has hit Australian shores and quickly gained a loyal following. Tiny houses are typically around 2.5 x 7 metres in size, can be completely off the grid and maximise every inch of cleverly designed space. They generally consist of a kitchen, bathroom, living area and sleeping loft and in Australia are often mounted on wheels to overcome current council building restrictions. People have embraced this trend in order to lead a minimalist lifestyle and be mortgage free, with tiny homes costing a fraction of the price of a regular house. In Australia, tiny houses seem to be popular with those entering the market for the first time as well as retirees. They’ve also been marketed as an ‘in between’ home, where people can live while saving for a deposit on a regular house. The tiny life is certainly not limited to these groups though. Many have simply embraced the trend after realising that perhaps we don’t actually need that much space after all. 3. Granny flats Changes to legislation in the past ten years has fuelled demand for and construction of granny flats in Australia, with accommodation ranging from modest studios to multi-bedroom mini-homes. Homeowners in granny flat friendly states – and in Sydney in particular – are taking advantage of the demand for comfortable and affordable rental accommodation in close proximity to the CBD, and benefiting from extra income from leasing one out. Those living in granny flats – commonly students, single people, young adults saving for a deposit and, of course, grannies – seem to be willing to compromise on a bit of space to take advantage of affordable accommodation close to the CBD. All Australian states except for South Australia, Queensland and Victoria now allow homeowners to generate income from a secondary dwelling on their land. 4. Baby boomers downsizing to apartments While empty nesters downsizing from their family homes into smaller apartments is nothing new, the trend continues. Alongside traditional retirement villages, many baby boomers are opting to move into comfortable apartments, allowing them to be closer to family and facilities in the city. The demand for apartment living has seen an apartment construction boom in our capital cities in recent times, with concerns that we could have an oversupply in a few short years. In the right areas, apartments continue to be a popular choice for investors because of this demand and other benefits such as the extra depreciation they can claim from common property. 5. Affordability The rising price of property in our capital cities – Sydney and Melbourne in particular – is something we hear about regularly in the media. Those who can afford to buy in the city as owner occupiers are often compromising by going smaller. This might mean for example purchasing a studio apartment instead of a one bedroom unit or a townhouse instead of a standalone house, due to the lower and more affordable price tag. As Sydney and Melbourne continue to become global cities it will be interesting to see if this trend grows and if we […]

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