Young buyers are sacrificing stamp duty and first-home buyer grant concessions by entering the market as investors rather than owner-occupiers in an effort to reach home ownership at a faster rate.
This phenomenon is being driven as a result of young first-home buyers being out-bidden by Baby Boomers with existing equity, but still eager to enter the market according to Members Alliance.
Members Alliance CEO David Domingo says young buyers are choosing to invest rather than become owner-occupiers because it also reduces any shift in lifestyle.
“In most cases we have clients in their mid-20s who know they have to take action early on in life in order to set themselves up financially – but are unwilling to move workplace or away from friends and family to live in their first home,” says Mr Domingo.
“This has actually encouraged smarter investing; it’s forced young buyers to think of what will make a great investment compared to buying a property they would only live in.
“This method also helps young buyers get ahead financially by having someone else, the renter, servicing their home loan.”
According to the Australian Bureau of Statistics (ABS), the number of first-home buyer commitments as a percentage of total owner-occupied housing finance commitments fell to 12.3% in April 2014 – the lowest figure since data collection commenced in July 1991.
The ABS is currently investigating how strong its first-home buyer loan data is after concerns were raised that ‘under-reporting’ could be occurring if some lenders were only able to accurately report buyers receiving a first-home buyer grant – something not every first-time buyer is eligible for.
“Young investors are stretching their dollar even further by pooling their funds with family members or partners to afford an above average investment in order to achieve long-term return,” says Mr Domingo.
“When the time comes to look at a second investment we’ll see these investors move out from their family home and into their first-bought home which they are closer to owning thanks to their strategic investment decisions.
“It’s one way to get ahead and it’s creating a new type of investor.”
If you need help with your first investment property, call 1300 365 731 to find out how Members Alliance can help.