Millennials Emerge as Most Active New Property Investors

A ‘For Rent’ and a ‘For Sale’ sign is seen in Canberra, Australia on Feb. 27, 2023. AAP Image/Lukas Coch

Millennials are leading the property investment market, accounting for 46 percent of the Commonwealth Bank of Australia’s new property investors last year, according to the bank’s recently published data.

Meanwhile, Gen X accounted for 37 percent of the new investors.

Australia’s average age of all property investors in 2023 was 43 years old, with an average loan size of $528,405, less than the country’s overall average loan size of $598,624. Since banks are now able to lend up to 5.2 times someone’s salary before tax, this mortgage amount, accompanied by a 20 percent deposit of $132,101, would afford anyone a home worth $660,506 across the country.

Meanwhile, the top five postcodes for new investment property purchases in 2023 were 2000 (Sydney CBD); 3029 (West Melbourne); 2765 (North West Sydney), 3064 (North Melbourne), and 2155 (North West Sydney). Sydney CBD, West Melbourne, and North Melbourne are consistently popular, with property investors being the top-performing investment postcodes, according to 2019 data.

Nearly one-third of all millennial property investors opted to purchase properties alone, according to Commonwealth Bank Executive General Manager for Home Buying, Michael Baumann.

This behaviour can be attributed to the inclination of many Australians to “rentvest,” a popular property trend.

“Rentvesting gives Australians the chance to get their foot on the property ladder sooner rather than later and purchase a property in a lower cost area without having to give up the lifestyle they have become accustomed to when renting,” Mr. Baumann said. 

Property investment buyer’s agency Your Property Your Wealth also has similar findings, with people from 25 to 40 years old being the most active investors.

“What is interesting is I am seeing a lot more recently (12 months) coming through – as the interest rates have risen, more younger people are coming through the doors to invest. This age group is 20 to 25, which is the largest increase we have seen since our business started in 2016,” Your Property Your Wealth Director, Daniel Walsh, told The Epoch Times.

“The reason for this is that they have the income, they have the savings, they don’t have household debt and a lot of them live with parents still. They understand that this is their time to jump on the property ladder and invest in something they can afford. Most are investing interstate.”

Walsh added that many from the younger generation do not rentvest to become extremely rich but to not get left behind as the cost-of-living increases.

“The feeling is if they don’t get into something they never will in five years’ time. I think it’s a valid point.”

Investors Contributing to New Lending

Based on the Australian Bureau of Statistics’ Lending Indicators data, investors have largely attributed to the proliferation of new lending since 2023.

ABS Head of Finance Statistics Mish Tan emphasised the significance of the increase in new investor loans since it made up over half of the growth in total new loan commitments over the past year, indicating steady confidence and interest in the merits of the property market among investors. 

In February 2023, the ABS disclosed that the value of new borrower-accepted loan commitments for investors in housing increased to a 1.2 percent change monthly and a 21.5 percent change yearly, amounting to $9.53 billion (US$6.23 billion). Moreover, the number of first-home buyers rose to 9,377, up 4.3 percent from January 2024 and up 13.2 percent from the year-ago period.

Despite the growing interest in rentvesting, Everybody’s Home urges the government to boost social housing as private homes fail to deliver affordability.

“The housing crisis is climbing the income ladder and hurting Australians of all stripes. Key workers can barely pay the rent, much less find a home near their work. Working people are living in tents, sleeping in cars, and seeking help from overstretched services,” Everybody’s Home spokesperson Maiy Azize said.

“Support is also growing to stop propping up hobby investors with tax handouts. A majority of Australians want the government to wind back these handouts.”

Treasury Increases Rates for Capital Works Tax Deductions

Earlier this week, the Treasury announced a proposal to increase the rate for the capital works tax deduction from 2.5 percent to 4 percent per year and reduce the final withholding tax rate on eligible fund payments from managed investment trust investments from 30 percent to 15 percent, to encourage investment and construction in the build‑to‑rent (BTR) sector.

The draft legislation will require a minimum proportion of dwellings to be offered as affordable tenancies and that the dwellings must be kept under single ownership for at least 10 years before they can be sold.

“Even with the best of intentions, drafting missteps could risk the delivery of high-amenity, securely tenured homes backed by the institutional capital that’s critical to deliver the homes our nation desperately needs,” Property Council of Australia Group Executive Policy and Advocacy Matthew Kandelaars said.

“The Property Council is reviewing the details of the legislation and will work with the government to ensure it delivers on its potential to create 150,000 rental homes and an additional 10,000 affordable rental homes.”