Categorised | Money

One in six Gen Y feel pressured to buy an investment property

Good news for the housing market: a survey by Australia’s largest independently-owned mortgage broker, Mortgage Choice, found over one third of Generation Ys planning to buy an investment property by June 2011 also aimed to purchase a home during that time. Almost one quarter wanted to create an investment property portfolio of ‘as many properties as possible’.

In further support of the housing market recovery continuing well into the future, the 2009 Property Investors Survey found 71% of the 281 Gen Y respondents were delaying their purchase until the First Home Owner Boost finishes on 31 December 2009.

Mortgage Choice senior corporate affairs manager, Kristy Sheppard said the survey provides evidence that activity from younger buyers will not phase out at the end of year as some commentators are predicting.

“Our franchisees tell us that many property investors are all set and ready to go once the Boost has had its day, and it appears Generation Y is no exception. It is encouraging to see so many young people keen to make their mark on the property market. Many have high hopes to purchase more than one property within two years and whether this is overly ambitious or not, the positive sentiment should provide a boost to the housing industry,” said Ms Sheppard.

“Almost one third of the investors-to-be – 31% – planning on entering the market for the very first time were forgoing their First Home Owner Grant to buy an investment property. Even more surprising and in the true spirit of their ‘want it now’ generation, 36% of Gen Ys plan to buy both a home and investment property or properties in the next two years.

“It is interesting that almost one in six – 15% – Gen Ys feel pressured into buying an investment property by family and/or their partner. This raises concerns around younger borrowers, who are less likely than other generations to have work security due to their propensity to job hop, over committing themselves at a time when interest rate rises are looming.”

Other key motivations behind these respondents planning to buy an investment property were:

· 93% – I want to set myself up financially for the future
· 79% – The benefits of the current property market
· 73% – I see more benefit in investing in property than I do in the share market
· 72% – Potential for housing prices rises
· 67% – I’ve researched the property market and feel property investment will enable me to achieve my financial goals sooner/better
· 67% – I want to get my foot in the property market door
· 66% – Currently-low interest rates
· 58% – Tax benefits
· 57% – Advice received from family, friends or a financial advisor
· 56% – Reading and/or hearing of others’ success

Despite pressure to buy, it seems younger Australians are relatively confident about property, with 61% rating their level of confidence in their state’s housing market as moderate (the highest of any generation) and almost one third – 30% – rating it ‘high’ (27%) to ‘very high’ (3%). This was lower than Generation X (40.1%) and Baby Boomers (37%). Meanwhile, 8% rated their confidence as ‘low’ and only 1% rated it as ‘very low’.

The survey also found the most common age that these Generation Ys would be upon purchasing their investment property was 25 years, at 15%. For survey purposes, Generation Y was born between 1980 and 1994 and so were aged between 15 and 29 years.

“Despite their uncertainty over the housing market’s health, Gen Ys are still keen to become investors and do so relatively early, giving themselves plenty of time to accumulate a larger property portfolio,” said Ms Sheppard.

“In fact, a large number have lofty ambitions as market players. 24% of respondents said they plan to create an investment property portfolio of ‘as many properties as possible’, which was the highest of any generation. 47% were looking to own two to three properties, 13% wanted only one, 9% were planning on four to five while 3% were planning on six to 20.”

High sights come at a high price, so it is not surprising close to one quarter currently live rent free at home (20%) or at someone else’s home (3%), saving for their future investments. Close to half pay rent (46%) and of those, 20% were doing so at their parent’s home.

A significant percentage had previously entered the property market, with 32% of respondents already home owners. Not surprisingly, only 8% own it outright.

“Mortgage commitment is daunting for many and for this reason we are seeing a large number of Gen Y property investors turning to friends and family for support. This generation is often seen to be more independent than those before them, yet buying with a partner topped buying on their own, at 49% and 35% respectively. 7% will purchase with a sibling, 5% with a parent and a further 4% with a friend,” said Ms Sheppard.

Where are the younger investors planning on purchasing? The areas around Australia that were seen to provide the best investment prospects until at least mid 2011 were:

· 17% – Within 15-50km of Sydney metropolitan area
· 16% – Within 15km of Melbourne metropolitan area
· 14% – Within 15km of Sydney metropolitan area
· 13% – Within 15-50km of Melbourne metropolitan area
· 10% – Within 15-50km of Brisbane metropolitan area
· 6% – Within 15km of Brisbane metropolitan area
· 5% – Within 15-50km of Perth metropolitan area
· 4% – Within 15km of Perth metropolitan area
· 4% – Outside 51km of Sydney metropolitan area
· 3% – Within 15-50km of Canberra metropolitan area

Upcoming Generation Y investors were more likely to be considering purchasing a house (73%) and less likely to be considering a unit/apartment (49%). 32% of respondents said they were looking to buy a townhouse/terrace, 5% a duplex and a further 5% a commercial property.

When they purchase their investment property, the aspects considered most important in order of preference will be:

1. Price
2. Locality – convenience to amenities and transport
3. Number and/or size of rooms
4. Features – such as driveway access, garage, swimming pool, backyard, fireplace etc.
5. Aesthetic appeal
6. Locality – prestige
7. Age of the property
8. Green/environmental aspects or initiatives

Ms Sheppard said, “In typical Gen Y style, many respondents saw a property having all the mod-cons as more important than living in a prestige location. The latter was much more important for both Generation X and Baby Boomer respondents.

“While ‘right here, right now’ is symbolic of the Gen Y mindset, most were looking a fair way into the future when it came to holding onto the investment property. 36% were intending to keep it for 10 years or longer while 46% were planning on five to 10 years and only 18% said up to five years – though this was the highest of any generation by more than seven percentage points.

“Although housing affordability is a big issue for this generation it doesn’t appear to be having a great impact in deterring them away from the market. Property ownership, whether for making money or making a home, is a goal that the majority of Generation Ys are aiming for.”

Call the customer service centre on 13 MORTGAGE, visit www.mortgagechoice.com.au

* For the purpose of the survey, Generation Y was born between 1980 and 1994, Generation X was born between 1965 and 1979 and Baby Boomers were born between 1946 and 1964.

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