Should Gen Y Never Buy?

Should Gen Y Never Buy?
An Editorial By Phil Anderson • Tuesday November 22th

 

This has been a question circling newspaper headlines recently, and
it’s raised some passionate debate among property commentators,
Millennials and Baby Boomers. But as time goes on the question may
alter itself from “Should” Gen Y ever buy, “Can” they ever buy? I
believe the answer to both is still yes, but it may not be what you think.

Just like many of our readers, I am a member of Gen X with a couple of
Millennials running around the house. Our situation isn’t a typical one, but I
must admit the question I’ve asked myself many times is what kind of
property environment my children will grow into.

One in three parent couples help their children enter the property market with
a deposit, but with real estate at an all time high in Sydney this is no longer
the “given” that it once was for some families. With the latest lending
restrictions being placed on potential home owners by the big banks, even
helping the next generation into a modest unit may require as much as
$125,000 deposit.

Understandably this can be an impossible figure for parents (or anyone for
that matter) to muster, and this is a trend that isn’t showing any signs of
weakening in the near future.

A mindset shift is required, as there are alternatives that can vastly reduce
this burden, while still allowing your kin to reap the benefits of the Australian
Property Markets.

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I still hear of many baby boomer parents vigorously encouraging their
youngsters to rush out and get into the market “before it’s too late”. The
lowest interest rates in history, as well as recent proof of how property prices
can work in an owners favour can be all the evidence Mum and Dads need to
make this recommendation.

And while I agree that these low interest rates on offer need to be capitalised
upon, I’m not sure that jumping in at the peak of a market to enforce long
term financial strain is the best way forward.

But finding a way to enter a safe and reliable market at a lower price point,
still obtaining good capital growth while you continue to rent may be a
good alternative.

While renting can often been
labelled as “dead money” (and I
can understand why) it can be an
affordable alternative provided
your money is working for you
elsewhere. The fact is that in
Sydney rents are around the
lowest they’ve ever been
comparatively speaking. When
placed next to purchase prices,
renting is more affordable
than ever.

There are still good quality investment locations offering strong rental yields,
and along with depreciation and tax offsets create an environment where your
investment can cover it’s costs, while you live more cheaply in your desired
location.

That all sounds very easy, and I don’t mean to paint a simplistic picture as no
matter what direction Gen Y goes in, one thing is for certain… they will need
to do more due diligence and research on their decision than any other
generation before them.

Being continually informed and updated on both the major cities, as well
as key regional hubs for investment potential is a pivotal requirement for
any investor. To download our latest State of the Nation report
completely free of charge please click here.

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