Less than a tenth of Millennials are investing in property

The Financial Fitness whitepaper, commissioned by broking franchise group Mortgage Choice and conducted by research firm CoreData, explored Australians’ attitudes and behaviours towards their finances.

Looking at Millennials, the report outlined that young adults generally have better financial habits than the overall population but are still pessimistic about their financial future.

The research found that 21 per cent of Millennials – those born between the 1980s and early 2000s – save more than 20 per cent of their net income after paying their mortgage rent and other living expenses.

This is markedly higher than the 16 per cent average for the remainder of Australians.

Moreover, 23 per cent said they monitor their finances at least once a month, with 56 per cent saying they monitor their finances at least once a week, higher than the national average of 52 per cent.

Despite this, 45 per cent of young adults said they were not confident that they are on track to achieve financial success and almost 80 per cent were worried about their current financial situation, particularly driven by concerns around the rising cost of living (40 per cent).

Reflecting on the findings, Mortgage Choice CEO Susan Mitchell said that these concerns could be impacting their appetite to purchase property.

Ms Mitchell said: “The research presents compelling evidence to suggest that Millennials are creating sound financial habits. Despite this, there is concerning data about their state of mind.

“The research suggests that the majority of Millennials have the right intentions when it comes to money management. The majority say their greatest priority in life at the moment is saving and budgeting, followed by paying for living expenses and then buying a property. However, despite their positive financial habits, the research suggests that Millennials are apprehensive about their financial future.”

She continued: “These concerns may be impacting Millennials’ ability or willingness to purchase property. The research revealed that 8 per cent of Millennials had purchased an investment property, compared to 12 per cent of overall respondents.”

The Mortgage Choice CEO concluded: “Recent data from the Australian Bureau of Statistics revealed there are fewer first home buyers in the market than there were this time last year. This is unsurprising given the high barrier to entry into the property market, such as stricter lending criteria, home loan deposits, high property prices and the emergence of the gig economy, which may be affecting Millennials disproportionately.”

Ms Mitchell suggested that young adults looking to ease concerns about their financial situations should consult a financial adviser to help them “sort through the noise” and help create strategic financial plans.

‘Stopping the inter-generational unfairness in the tax system’

The fact that fewer young people are buying investment properties was a key driver for the Australian Labor Party’s wish to change negative gearing rules should they gain power after the federal election.

In March, the shadow treasurer announced that, from 1 January 2020, it would “make sensible and overdue changes to negative gearing to put young first home buyers on more of a level playing field with property investors seeking their sixth or seventh property”.

Speaking in his budget reply speech in the House of Representatives earlier this month, Opposition Leader Bill Shorten Labor said the party would therefore retain negative gearing for new investment properties to help boost housing supply and jobs, grandfather all existing negatively geared investment properties made prior to the 1 January 2020, and halve the capital gains tax discount for investments entered into after 1 January 2020.

The measures are estimated to raise $2.9 billion over four years or $35.1 billion over 10 years. These figures, however, have been disputed.

Mr Shorten said during his speech: “We believe the Australian people are hungry for a united, stable government with a real vision for the future. One that can make hard decisions.

“We believe that government has a responsibility to leave the place better than when we found it. That is why we are going to stop the inter-generational unfairness in our tax system.”

He elaborated: “Now, if you’re currently negatively gearing, the rules won’t change. If you want to use it on new homes, you still can.

“But you cannot have property investors playing with loaded dice against our young people, Generation Y and the Millennials. And instead of patronising millions of young Australians with lectures about cutting back on smashed avo, why don’t we tell them the truth.

“Getting together a 20 per cent deposit plus stamp duty is so much, much harder than it was 20 or 25 years ago,” he said. “And it is even more difficult when your government uses your taxpayer money to subsidise the property investors bidding against you.

“The inter-generational bias that the tax system has against young people must be called out. A government must be brave enough and decent enough to stop the bias against first home buyers and young Australians. And we will be that government,” Mr Shorten said.

[Related: ALP’s negative gearing modelling questioned]