Property investors getting younger

21 June 2016
In spite of sky-high property prices, sluggish wage growth and tighter lending restrictions, property investors in Australia are younger than ever, according to a survey from Mortgage Choice.

Amidst the debate surrounding negative gearing and housing affordability, much has been said about how young people have become disenfranchised from the Australian property market. This is mostly down to the soaring property prices around the country which have locked a lot of younger people out of attaining the “Great Australian Dream”.

These property price rises have by far outpaced wage growth over the past few years, making it even harder for younger Australians to save up for a deposit and putting the dream further out of reach. Aside from the government’s suggestions that young people “Get a good job that pays good money” or get their parents to “shell out for them”, there have been few solutions to this problem.

But surprisingly, new data from Mortgage Choice found that property investors in Australia are getting younger.

Surprising findings

Mortgage Choice’s 2016 Investor Survey revealed that:

  • 50.8% of investors were 34 years old or younger when they first purchased an investment property.
  • In 2013, this figure was just 33.8%.

The online survey was completed online in May 2016 by over 1,000 Australians who were planning to purchase their first investment property in the next two years or recently purchased their first investment property.

Mortgage Choice CEO John Flavell said he was surprised by this increase in the number of younger property investors.

“With property price growth outpacing wage growth over the last few years, saving a deposit and buying property has become very difficult for a lot of younger Australians,” he said.

“Furthermore, the recent spate of investment lending changes has made it tougher – in some instances – for younger Australians to obtain finance to buy property.”

According to the survey data, the top reason for why Australians bought an investment property was to “set themselves up financially for the future”, with 29.6% of respondents saying this.

CANSTAR Q&A with John Flavell – Mortgage Choice CEO

Q: Lately we’ve seen soaring property prices, stagnant wage growth and tougher lending restrictions – so how might there be more younger property investors?

Australians understand the benefits of property investment. With property prices rising fairly steadily across most markets, property investors are aware that they will likely see a good return on their investment over the medium to longer term. For this reason, we have seen an increase in the overall level of investor activity over the past 5 years.

We have also seen an increase in the level of young Australians who are willing to put overseas travel experiences and car purchases on the back burner in order to save for a buy property. Given that many young property buyers can’t afford to purchase a home where they want to live, a growing proportion of first time buyers are choosing to invest in property in a suburb/area they can afford. So, instead of buying a home to live in first, they are buying an investment property first.


Q: Is it possible that more young people are turning to their parents to act as guarantor for an investment property loan?

Definitely. We have seen a significant increase in the number of parents going guarantor on their child’s loan. By having your parent go guarantor, a first time buyer can get on the property ladder sooner rather than later. Further, because the parent’s home equity supports the guarantor, the parent doesn’t actually have to give their child money – which is very appealing to both parties.


Q: What’s the attraction for young people investing in property now ?

Interest rates are sitting at record lows, making the cost of borrowing more affordable than ever before. Further, property prices are rising fairly steadily across most markets – a trend we can expect to continue into the future. Young investors are acutely aware of these two things and thus see property investment as not only an achievable goal, but a goal that is going to deliver solid returns down the track.

Q: What advice do you have for younger property investors?

One of the key pieces of advice I would give to potential property investors is: do your research. Before buying an investment property, it is important to do your research and get a good understanding of the current property market. In your research, look for suburbs that perform better than others in terms of rental yields and capital growth.

At the end of the day, when buying an investment property, location is everything. If your property is not close to transport, shops and other amenities for example, it may be hard to find tenants for the dwelling.

In addition to buying the right type of property in the right location, it is critical that property investors find the right type of loan for their needs. Potential property investors should ask themselves: What loan structure is right for me? Do I want an interest only or a principal and interest loan? Fixed or variable rate? Which features will I need? By answering these questions, potential investors can choose the right type of loan with confidence.

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