The ‘live now, pay layer’ 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.
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.
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.
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.
Willing to sacrifice
Preparation and planning should be the first step in creating a sound investment strategy. 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.
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
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.