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First home buyers aren’t gone, they’re just investors now- John McGrath

In his regular  Switzer Daily column real estate guru Joh McGrath wrote: New research suggests first home buyers aren’t actually absent from the market, they’re just buying for investment rather than owner-occupation.

Australia’s market recovery is being driven by investors, particularly in NSW where around 50% of new borrowers are purchasing for investment, according to the latest stats from the country’s biggest broker, AFG.

Meantime, just 3.4% of new borrowers in NSW and 9.9% of borrowers nationwide are buying their first homes – well below the long term average of 15-20%.

So it was interesting to see an article in The Australian newspaper quoting new research by Macquarie and financial services research firm, RFi that concludes that much of this investment activity is coming from young and predominately middle to high income earners rather than older speculators. They’re dubbing them ‘first home investors’.

Affordability and lifestyle are the main reasons why many young people are buying first investments instead of first homes.

They can’t afford to buy in the lifestyle suburbs they want to live in – despite earning good incomes, so they’re buying in more affordable areas for investment instead. This gets them on the property ladder without compromising their lifestyle, which they hold very dear.

Gen Y is often described as a ‘generation of renters’ and in some ways, this is true. Living in their favourite lifestyle suburbs – which are often markets that are too expensive to buy in, or remaining at home with their parents is more appealing than doing what our generation did – scrimping, saving, buying a small first house on the outskirts and commuting to work.

But this ‘generation of renters’ aren’t giving up on property. Remember, these are the children and grandchildren of several generations of proud Australian home owners.

They were taught about ‘the Great Australian Dream’ and they understand that property is a cornerstone asset for future wealth. They want to follow in mum and dad’s footsteps, they’re just doing it differently.

First home investing means young people can take advantage of all the generous tax breaks we are eligible for as investors, including tax deductible interest on our loans and depreciation.

[sam id=13 codes=’true’]With record low interest rates and rising rents across the country, many first home investors are finding themselves immediately neutrally geared – or only slightly negatively geared, as soon as they buy. That’s an amazing position to be in at the start of a new growth cycle.

Traditionally, if you were a renter you were perceived to be the poor cousin of property owners. Not so these days. Renting is now more about lifestyle choice instead of limitations.

Value sets have changed and while older generations wanted to buy and pay off their first homes ASAP, today’s younger generation will tell you they value lifestyle first over buying a ‘home of their own’.

This is something I love about real estate. It’s always changing – and people adapt with it. That’s why I’ve never bought into the idea of property being ‘unaffordable’.

Sure, some markets are too expensive to get into, especially if you’re young and not yet making an executive salary. But affordability is never that cut and dry.

You can buy an apartment instead of a house.  You can ask mum and dad to be guarantor on your loan. You can look at surrounding suburbs or different parts of a city that offer the same lifestyle but are less expensive to buy in.

There are always opportunities to get into real estate, you might just have to think outside the box – like today’s first home investors. Good on them!

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This article originally appeared on Switzer Daily.

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'First home buyers aren’t gone, they’re just investors now- John McGrath' have 2 comments

  1. Avatar for Property Update

    May 19, 2015 @ 9:10 am Dan

    I like the article and generally agree with everything said, after all i am one of those investor renters.
    I strongly disagree with asking parents to be guarantor on a loan though, i believe if you aren’t able to get a loan based on your own financial position, you should change your position to something more sustainable rather than potentially dragging your family down with you.

    Reply

    • Avatar for Property Update

      May 19, 2015 @ 3:28 pm Michael Yardney

      Dan, you make some good points. I agree that it’s important for young people to develop the savings discipline before they take on large financial commitments

      Reply


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