Gen Ys dream of property

Gen Ys dream of property

Seven out of 10 Gen Ys believe it is important to buy a property as soon as possible — but are changes to bank lending making it harder to get into the market?

New research shows that Gen Y has a strong affinity with purchasing property, with seven out of 10 believing that it is important they buy into the market as soon as possible.

The Future Leader Index, released by BDO, shows 72 per cent believe it is important to buy a home as soon as they can, even as they worry about their current and future debt.

The study found:

  • 8 in 10 were concerned3 about the mortgage debt they may face over their lifetime
  • 8 in 10 were concerned about having enough money for retirement
  • Three-quarters were concerned about the costs they may face bringing up children and
  • 7 in 10 were concerned about debt arising from study and education.


Despite this, 75 per cent said they were prepared to take on a mortgage, with most of those who had started on the property ladder doing so with the help of family acting as guarantor or adding to their deposit.

And a growing percentage of first homebuyers were actually purchasing an investment property to start themselves on their way.

Colliers International residential agent Lauren Lovelace says that while there is still an appetite for Gen Y investors to enter the market, recent changes to borrowing rules and wage constraint are making it harder for first-time entrants.

Changes by the Australian Prudential Regulation Authority now require banks to curb the growth in residential investment lending, with changes by some banks including setting a higher bar for stress tests and restricting the loan to value ratio (the proportion of the property able to be borrowed) to 80 per cent.

“Even with a softer market in Western Australia it can be hard for a Gen Y investor to have accumulated enough capital to put down $100,000 on a $500,000 property,” Ms Lovelace said.

“It’s a change that has made it much harder for younger investors, unless they have significant savings or can access support from family to get a decent deposit together.”

Ms Lovelace said there was no doubt that residential property investment acted as a wealth generator but warned younger buyers could be shut out, particularly those also trying to buy their own home or juggling things like higher education debts.

Relatively low wages also remain a barrier to growing the Gen Y property portfolio.

Figures from mortgage comparison site RateCity last December showed Gen Ys believed they needed three incomes to pay for a property (reflecting help from mum or dad) while Gen X needed two incomes to pay and Baby Boomers had been able to pay off properties on a single income stream.

Ms Lovelace says buying an investment property as an entry point into the market can help Gen Ys build equity but a gap has opened between those able to afford that first step and those who cannot.

“For Gen Y getting an income stream or capital for a deposit from a rental property can be a major factor in being able to buy their own property in the area of their choice, which is why many invest first and occupy later,” Ms Lovelace says.

“But that hurdle of getting the first investment property is getting higher.”