July 26, 2011
43% of Generation Y's upcoming first-time property investors are putting aside the traditional 'Great Australian Dream' of a home for now and instead buying an investment property as their first purchase, according to the country's largest independently-owned mortgage broker.
Not only will they ignore the First Home Owner Grant and first home buyer concessions, 77% of Gen Y respondents to the national Mortgage Choice 2011 First Time Property Investors Survey* are making lifestyle sacrifices to achieve their goal. This compares to only 66% of Gen X and 66% of Baby Boomers.
These younger Australians' biggest concern for the next 12 months was interest rates, whereas for Gen X it was other costs of living such as utility bills and for Baby Boomers economic management at a Federal Government level was the primary concern.
Mortgage Choice spokesperson, Kristy Sheppard said, "Our findings call into question the concept of the 'Great Australian Dream' for people aged 30 years and younger. Is it still a home, is it property in general - whichever type they can afford - or is it simply about investing in an asset they expect to bring in income and/or appreciate in value?"
Key motivations to buy
All generations agree the top motivator to purchase an investment property is 'I want to set myself up financially for the future'. Delving further into these for Gen Y, 15% said 'I can't afford to buy the home I want so I'm taking the first step with an investment property', 14% said 'I'm not ready to own my own home but want to get a head start in the market' and 8% said 'I don't wish to own my own home but I see the benefit in having an investment property/ies'.
The majority of all survey respondents plan to rent the property to an unknown, but Gen Y was much more likely to rent to family or friends. 22% will do so versus 8% of Gen X and 10% of Baby Boomers.
"Whilst it is clear that every generation is focused on profiting from their investment over the long term, many Gen Y respondents recognise building a nest egg rather than building a nest may better suit their income and needs at this early stage of their lives," Ms Sheppard said.
"In addition, I'd say a large proportion is quite comfortable residing in the home created by their parents!"
Sacrifices, purchase partners and research
Despite stereotyping of Gen Y as the 'me generation' who expects things on a platter, most respondents are planning to make (or were already making) lifestyle sacrifices to enter the market.
The top 10 were:
- Eat out less and cut back on take-away food - 65%
- Cut back on general day to day spending - 64%
- Miss out on a holiday - 47% (the least likely of any generation)
- Cut back on alcohol related spending - 40% (most likely)
- Delay a vehicle purchase - 28% (least likely)
- Change jobs for higher income - 28% (most likely)
- Take on an additional job - 23% (most likely)
- Delay having children - 22% (most likely)
- Rent out one or more rooms in my home to help me cut costs - 20% (most likely)
- Purchase a less expensive property than desired - 20%
The survey found Gen Ys more independent than their elders. 26% will buy solo, versus 23% of Gen X and 22% of Baby Boomers. In terms of co-owners, 'partner' was the top option for all, just as the internet is the preferred source for researching their purchase. Traditional websites are favoured, however one in five Gen Ys are using social media sites, compared to just 11% of Gen X and Baby Boomers.
* Ticketek Insights (now Nine Rewards) ran the independent survey from 17 to 24 June 2011, interviewing 1,060 Australians who were purchasing their first investment property in the next two years. Respondents were evenly split between male and female while 28% were Generation Y, 45% Generation X, 27% Baby Boomers and less than 1% were Builders. For the purposes of this survey, Gen Y is born between 1980 to 1994, Gen X between 1965 and 1979, Baby Boomers between 1946 to 1964 and Builders between 1925 to 1945. Each major state (NSW, VIC, QLD, SA and WA) had just over 200 respondents while NT and TAS were not used in state-based comparisons due to their small number of respondents.
For further information or to arrange an interview, please contact:
(02) 8907 0472 / 0407 416 124