Younger generations are often accused of being ‘lazy’ or ‘lacking life experience’ by their older and allegedly wiser counterparts.
But when it comes to the perspective Australia’s ‘twenty somethings’ seemingly have about creating wealth with property, many are showing more foresight than the majority of their parents did at the same tender age.
Learning from mum and dad
There’s no denying that valuable life lessons can and should be learnt via the mistakes made by those who’ve gone before us. This is a vital aspect of evolution after all.
When it comes to our relationship with money and other commodities (including real estate), each generation tends to react or respond in some way to the circumstances and experiences they watched their parents and grandparents endure.
We naturally learn from our environment, experience and observation.
Hence people who have grown up in extreme poverty, without the necessary provisions to escape those circumstances, will generally be so unfamiliar with the world of monetary exchange that they’ll remain poor their whole lives.
Or we see the polar opposite occur in those who determine, after watching their parents struggle, to do things differently in order to achieve a better social status and therefore, more fruitful relationship with money.
For a few of these fiercely ambitious individuals, the planets will align and they’ll become the one in a million ‘rags to riches’ tale, used to inspire others on their own wealth creation journey.
Never has humanity been so globally united on any front, than when it comes to the fact that ‘money makes the world go ‘round’.
Capitalism has virtually been imprinted on our DNA, so to imagine a world without its mechanics is increasingly difficult…as is evident from the rising tide of consumption with each new generation that comes along.
From ‘a place to call home’ to ‘profit margins’
The Great Australian Dream has been evolving since the British first settled our relatively infantile society, largely influenced by the generational experiences of our broader culture.
Consider how, after seeing their forebears battered and bruised by two successive world wars and a Great Depression, the parents of baby boomers took to the idea of property ownership as security – a ‘place to call home’ that was safe, providing shelter and comfort.
Their older baby boomer offspring continued this tradition, but with a new spin that saw housing start to emerge as a social status.
If you attained the ‘dream’ of a large suburban block with a vinyl topped Ford or Holden in the driveway, then you’d made it. This was your ultimate objective. Home ownership.
Then in the eighties, the baby boomer mindset was influenced by a new mentality as consumerism was encouraged in a BIG way. Not through need anymore, but from a base desire (likely borne from their parent’s misfortunes), to accumulate a lot of stuff.
This of course coincided with the deregulation of Australia’s banking industry to increase competition (that was successful, wasn’t it?), which in turn saw lenders up the accepted LVRs on standard variable mortgages.
Now property was about ‘keeping up with the Jones’s’ and you had to work harder to pay a larger mortgage on a bigger and better McMansion, in order to prove your net wealth to the world.
Then came things like negative gearing, which some boomers saw as an opportunity to save tax and therefore, determined to buy a few property investments.
In 2008, the entire world experienced a monumental economic shake up in the form of the GFC and suddenly, a new influence emerged on the already changing baby boomer ideology around property.
Younger baby boomers and older Gen-Xers boar the financial brunt of the GFC, which only made them more aware of the fact that traditional Super funds and commodity markets were perhaps not the most reliable of retirement plans.
The property investment boom
Now a new generational shift is helping to shape the ‘Great Australian Dream’. Alongside their Gen-X parents looking to rebuild a financial future, stands the Gen-Ys and ‘Millenials’.
Influencing their relationship with real estate is not only the observation of what has gone before, but also things like affordability, concerns over rising unemployment and a general lacklustre global economy that’s full of future uncertainty.
For them, property ownership is less about establishing a home, and more about growing a portfolio. They recognise that the only people they can rely on for their future financial security, are themselves.
Now ‘coming of age’ means popping your property investment cherry, as indicated by a Mortgage Choice study that shows that close to a third of all investments made in today’s markets are by first homebuyers.
Shaping the new real estate revolution
A number of environmental, experiential and circumstantial factors are helping to affect this current shift in our cultural ideas around property ownership.
- Lifestyle
For younger generations trying to make it ‘on their own’ and establish careers, it’s essential to go where the work is. This is generally in and around our CBDs, along with most of the amenity young people find alluring, such as trendy bars, cafes and retail outlets, as well as good transport infrastructure.
However affordability in these areas can be a massive barrier to home ownership, particularly in the likes of inner city Sydney.
Hence, a growing number of young people are buying a property that little bit further out, where decent rental yields and reasonable rates of capital growth provide the means to service the tax deducible debt on their investment, while renting in their preferred lifestyle area.
- Affordability
This goes hand in glove with lifestyle. But young people are not necessarily being scared away in their droves due to rising house prices, as many media reports suggest. Rather, they’re wisely recognising the opportunity to get on in on the action, seeking out low-entry point locations before prices extend beyond their reach.
Remember, this is a demographic that’s grown up on anecdotes from older relatives who can attest to the fact that property prices have tripled in value in their lifetime. Hence many young buyers are doing their research and actively seeking out ‘cheaper’ areas down the line, which are undergoing gentrification and predicted as stand out future growth suburbs.
- Changing attitudes
The Australian demographic is diversifying – we’re living longer and in shrinking households, marrying and starting families later in life and more young people are prepared to stay at home with mum and dad in order to get ahead.
Where once you moved out of your parent’s place as soon as you could earn enough to pay rent on a shoebox, now it’s largely accepted that living at home is far more feasible for that financial boost.
More than half of Australians aged 18 to 24 still live with their parents.
Rather than suggest this reflects a generational apathy, it’s important to understand the actual financial motivations and influences shaping these shifting attitudes, to better understand our ever-evolving markets and stay ahead of the game.
This new breed of young, tech savvy investors have greater access to comprehensive market data than any generation that’s gone before, and you can bet they’ll use it to up the ante when it comes to our residential real estate markets. It will be intriguing to see how they shape the world of bricks and mortar for generations to come.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).