Millennials turning away from property investment
The proportion of property investors aged 28 to 43 is declining at a rapid rate as financial obstacles mount.
It seems that my generation, the millennials, or Gen Y, have started to drift away from the idea of owning property - whether we ever truly felt connected to it in the first place is up for debate!
In the past decade, the number of working Australians who own investment properties has declined.
According to the Australian Tax Office, in 2014, a whopping 21 per cent of working Aussies owned an investment property. Today, that percentage has inched downwards to 19.4 per cent.
There are currently 2.29 million property investors in Australia, which is in absolute terms also down – the peak was 2.39 million four years ago.
And guess what? It’s my generation leading the push away from property investment.
Since the year 2000, the proportion of property investors aged 40 or under has plummeted from 33 to 25 per cent.
Meanwhile, those Australians over the age of 60 make up 26.5 per cent of all property investors compared with just 14.7 per cent in 2000.
So, why are working Australians opting out of the investment market? It can’t be a belief that property isn’t a viable investment category because property prices have nearly doubled since 2024, and a big chunk of that growth came following the pandemic.
It could be attributed to the higher cost of entering the market. It could be the higher interest costs. It could also be a lack of understanding.
Property investment a rewarding option
There is no doubt in my mind that it is harder to get started as a property investor today. The overall price is higher, and changes to the banking regulations have made it harder still.
But with all of that in mind, for me, property investment remains the safest and best way to invest and build wealth. It’s by no means the only way, but it is one of the most viable ways.
If you buy land and build a house on it, it will provide you with enough income and tax deductions to cover the holding costs and buy yourself time to allow compound growth to occur. You can’t go wrong.
I think that’s where people overcomplicate things. Like with a lot of things in life, it is our tendency to make things more complicated than they need be.
One in two property investors typically buy an apartment or townhouse, which means they don’t own a lot of land, and this is the appreciating component.
One in two property investors is typically cash flow negative, which means they likely aren’t setting the properties up to pay for themselves.
Finally, the average property investor tends to sell after holding the property for six-and-a-half years, and this limits the benefits afforded by compound growth.
It is safe to say that the foundation of many families’ wealth is the result of property investment. The Baby Boomers – Australia’s wealthiest ever generation – were obsessed with it.
I’m hopeful that my fellow millennials can reverse the trend and fall back in love with this simple but effective investment wealth builder.
