August 15, 2013
The ‘live now, pay later' mentality often associated with Generation Y is being defied, according to the results of a recent national survey.
The findings of the Mortgage Choice 2013 First Time Property Investors Survey* show that younger generation Australians are shaping up to be savvy investors who are aware of the benefits of buying into the property market and are often willing to give up aspects of their lifestyle to fund their purchase.
Of the 1,000+ Australians surveyed who were planning to buy their first investment property in the next two years, Gen Y made up more than one third (34%) of the respondents. Interestingly, for two fifths of these Gen Y respondents, an investment property will be their first ever property purchase.
Commenting on the survey findings, Belinda Williamson, Head of Corporate Affairs for Mortgage Choice said, “Gen Ys appear to be financially switched-on and are focusing on property investment, with 40% of the respondents in this age bracket willing to forgo any available First Home Owner Grant on their first property purchase in favour of buying an investment property as opposed to a home. Meanwhile, the other 60% of the Gen Y respondents already own their first or subsequent home and are now branching out to make an investment property purchase.”
With financial security high on their agenda, Gen Ys were motivated to purchase their first investment property by the need to set themselves up financially for the future (75% of Gen Ys), followed by the perception that there is more benefit in investments such as property, than there is in the share market (47%) and rounding out the top three was the notion of planning for their retirement (43%).
“This younger generation of investors is looking for financial freedom and they see more profit in bricks and mortar investments,” said Ms Williamson.
The decision to purchase an investment property can see some buyers having to overcome a few hurdles. The greatest challenge for Gen Y first time investors as indicated by them was saving a deposit (42%), followed by finding the right investment property (29%) and choosing their investment strategy (15%).
“Finding the right property is half the challenge for most investors; the other half is saving the deposit and settling on an investment strategy that will help them to achieve their goals,” Ms Williamson said.
Willing to sacrifice
Preparation and planning should be the first step in creating a sound investment strategy. Ms Williamson said buyers need to be realistic about what they can afford and for some, buying an investment property may be impetus to cut back on some of their spending and lifestyle habits.
“While purchasing an investment property can be an extremely rewarding exercise, the mortgage that is typically tied to the property is obviously a large financial commitment, which takes careful long-term thought and action to manage properly. The right finance plan from the beginning can certainly pay off over the long term,” said Ms Williamson.
“Our survey shows 75% of Gen Y first time investors were choosing to make lifestyle sacrifices to help them achieve their property goals. The top five lifestyle sacrifices included cutting back on general day to day spending, eating out less and limiting take-away food, missing out on a holiday, delaying a vehicle purchase and last but not least, cutting back on alcohol related expenses.”
Bucking the trend
Ms Williamson concluded by saying it is encouraging to see Gen Y bucking the stereotype of being reckless with their money, proving to the generations ahead of them that they are more astute when it comes to investment decisions than given credit for.
“It shows that age doesn't matter when it comes to building an investment property portfolio. A sound investment strategy should set anyone up for success, regardless of their life stage,” Ms Williamson said.
*About the survey
Market research company Nine Rewards was commissioned by Mortgage Choice to conduct the 2013 First Time Property Investors Survey. The online Survey was conducted in late July 2013 and completed by 1,019 Australians who were planning to purchase their first investment property in the next two years. For the purposes of this survey, Gen Y is born between 1980 and 1994, Gen X between 1965 and 1979, Baby Boomers between 1946 to 1964 and Builders between 1925 to 1945. Note, the figures in the media release commentary have been rounded to the nearest whole percentage point.
This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the information, consider its appropriateness to your circumstances.