Gen Y is at the top of the property investment ladder; Gen X, then the Baby Boomers are behind them. National figures show that some 22 percent of Gen Y own at least one investment.
Despite affordability problems, research shows homebuyers aged between 18 and 34-years (Gen Y) are breaking into the housing market. In comparison, some 20 percent of homebuyers aged 35 to 49-years (Gen X) owned more than one investment property. Whereas some 19 percent of 50 to 64-year-olds (Baby Boomers) owned many investment properties.
Has a Rise in Rentvesting Lifted Gen Y Investment Levels?
Research suggests that Gen Y is using rentvesting as a tool to buy investment properties, instead of an owner-occupied home. Instead, Gen Y rent a home in a location they like and then buy a home in an affordable suburb. They will then rent this home to another person. This strategy allows them to put their money to good use, and to live the lifestyle that they crave.
Rentvesting is the biggest shift in harder to get into markets, such as Brisbane, Sydney and Melbourne. In fact, Brisbane property experts suggest that its the largest trend change in some 15-years. When buying a home, this was the one you lived in; later you would buy an investment said the experts. Now this tradition has flipped.
A rentvestors first property is an investment; then they go on to save for their home. For instance, a 24-year-old female, lets call her Sam, buys a 2-bedroom townhouse for $320,000. Sam stays at home and works part-time while studying at university. All of her money goes towards a home deposit. She bought a property near the train line and other amenities. This property is her first investment property; her second property will be her home. For now, she continues to live at home and save. Furthermore, this investor is one of many doing the same, so they can make their money work for them.
How Many Australians Own an Investment Property?
According to data, since June 2015, investors numbers who own five or more properties has grown by 35 percent. Subsequently, this is a jump from 175,000 Australians to 272,000 in 12-months. The Australian Taxation Office (ATO) states 72 percent of individuals who own an investment property have just the one. Whereas some 18.9 percent of Australians own two investment properties and only 0.9 percent own six or more.
ATO data suggests that 1.8 million Australians, just under 8 percent, own an investment property. Of this number, 1.2 million or two-out-of-three, are negatively geared and report a loss on their rental income.
Is the Great Australian Dream of Home Ownership Still Alive?
Many property investment experts suggest that the Australian dream of home ownership is alive and definitely kicking. A sign of this is the fact that Gen Y is buying a rental, before purchasing a home. Notably, this strategy enables younger home buyers to purchase smaller homes in cheaper locations, then to rent the properties out. Therefore, the rent covers the mortgage, and over time the property will appreciate. Thus, many younger investors feel this method is a safer investment choice than volatile shares.
Shares are also not all that exciting said real estate experts. Whereas an investment property you can drive pass, so the asset seems more real. Shares were also far more inconsistent than property prices. Plus, they plummeted and rose in price erratically. But, home values change gradually over time and have a long-term worth.
Gen Y is both refreshing, and motivated economists said. They have seen their parents work for 45-years and then live a modest lifestyle on an aged pension. So, they want to invest early in life, so they have a secure future.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!