Gen Y bucks stereotype by embracing property investment

August 20, 2013
Anita Cossenas

Survey reveals younger generation more financially astute than given credit for   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 are looking 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, local Mortgage Choice Camberwell franchise owner, Michael Wren 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 the First Home Owner Grant in favour of buying an investment property before a home. Meanwhile, the other 60% of the Gen Y respondents already own their first or subsequent home and are now looking to make an investment property purchase.”   Key motivations 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 investing in property is more beneficial than 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 Michael.    Greatest challenges The decision to buy an investment property can see some first timers 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,” Micheal said.   Willing to sacrifice Preparation and planning should be the first step in creating a sound investment strategy. Michael Wren 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 Michael.     “The survey shows 75% of Gen Y first time investors are 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 Michael Wren 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,” Peter said.   If you want to learn more about your home loan options, call 9813 3522, visit Level 1, The Rear, 618 Burke Rd, Camberwell or log onto www.   Table 1: Generation breakdown   What is your generation? National Gen Y 33.8% Gen X 40.0% Baby Boomers 24.8% Builders 1.4%   Table 2: Investment status   Will this be your first ever property purchase? Gen Y Yes 40.4% No, I own my first home 54.1% No, I have owned more than one home before 5.5%   Table 3: Key motivations   What are the key motivator/s for looking to buy an investment property? Gen Y I want to set myself up financially for the future 74.7% I see more benefit in investments such as property, than I do in the share market 46.5% To plan for my retirement 43.0% Tax benefits 41.0% Potential rental yields I can get 39.0% I have researched the property market and feel property investment will enable me to achieve my financial goals sooner/better 34.0% Capital gain 27.3% To diversify my asset portfolio 26.7% Advice received from family, friends or a financial adviser 25.9% Reading and/or hearing of others’ success 23.8% My parents' success/experience with property investments 21.5% Negative gearing 20.6% Building a portfolio to hand on to beneficiaries 19.8% Positive gearing 17.2% I can’t afford to buy the home I want so I’m taking the first step with an investment property 11.0% Pressure from family/my partner 10.2% I’m not ready to own my own home but want to get a head start in the market 9.9% I don’t wish to own my own home but I see the benefit in having an investment property/ies 7.0% Other 0.9%   Table 4: Greatest challenges   What is your greatest challenge as a first time investor? Gen Y Saving a deposit 42.4% Finding the right investment property 28.5% Choosing the investment strategy 15.1% Choosing the right property loan 7.0% Getting the finance approved 4.7% Sourcing quality financial advice 2.3%   Table 5: Willing to sacrifice   Are you or do you intend to make small or large sacrifices to your lifestyle in order to purchase your first investment property? Gen Y Yes 75.3% No 24.7%   Table 6: Top sacrifices   Which of these lifestyle aspects do you intend to sacrifice in order to purchase your first investment property? Gen Y Cut back on general day to day spending 50.58% Eat out less and cut back on take-away food 46.51% Miss out on a holiday 40.99% Delay a vehicle purchase 27.91% Cut back on alcohol related spending 22.97% Purchase a less expensive property than desired 20.93% Change jobs for higher income 20.06% Take on an additional job 18.02% Remain in my current job rather than moving on 15.70% Delay having children 15.12% Cancel gym membership 11.63% Move back in/stay living with your parents or in-laws to save 11.05% Delay wedding/ cut back on guest list 10.17% Rent out one or more rooms in my home to help me cut costs 8.72% Quit smoking 8.43% Purchase property in a non-ideal location 8.14% Cancel my private health insurance 4.94% Move to cheaper shared accommodation beforehand to save 4.65% Other 0.00%     For further information or to arrange an interview, please contact:   Michael Wren, Mortgage Choice Camberwell on 9813 35212   *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 purchasing 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.   Important information   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.   About Mortgage Choice   Mortgage Choice has sourced a home loan for well over 350,000 people since 1992. It works with all manner of property finance borrowers via hundreds of franchises.   The company writes one in every 25 home loans in Australia by providing professional guidance on, and choice of, products offered by an extensive panel of leading lenders. Many of its brokers provide a broader service, helping customers source commercial and personal loans, asset finance, deposit bonds and providing referrals for risk and general insurances.   Uniquely, Mortgage Choice pays its franchisees the same commission rate for home loans they write, regardless of rate paid by the lender a new customer selects, working in the customer’s best interests to tailor a solution to them.   To cater to the growing needs of our customers, Mortgage Choice soft-launched in October 2012 its new financial planning business. Mortgage Choice Financial Planning will officially launch in FY14.   The company has no balance sheet or funding risk, and consistently delivers strong profits and attractive yields. It listed on the ASX in 2004 (MOC) and is a member of the Mortgage & Finance Association of Australia (MFAA). Mortgage Choice holds an Australian Credit Licence: no. 382869, issued by ASIC and Mortgage Choice Financial Planning Pty Limited, a fully owned subsidiary of Mortgage Choice, holds an Australian Financial Services License: no. 422854, issued by ASIC.

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