- Posted 06 Aug
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The Millennial generation covers a 15-year span of people born between the mid 1980s and the early 2000s. Many are becoming first home buyers and some have already been investing in property for years.
Do these younger buyers have different purchasing habits, or do they set different priorities for what they value when searching for a home?
Let’s take a look at how Millennial buyers approach the real estate market.
Challenges for Millennials
The largest obstacle for Millennials entering the market is saving the money they need for a deposit. They may have a good job and qualify for a home loan, but they sometimes lack the discipline to create and stick to a savings plan.
At the moment it is relatively easy to borrow money and interest rates are low. For this reason, it is an excellent time for Millennial buyers to enter the home market. But at the same time, rising prices mean that some buyers have to adjust expectations or change their buying strategy.
First home buyers may have to move further away from the city centre than they would like, purchase a very small space initially, or get creative in their approach to property investing.
Another challenge is the sheer volume of information today’s property buyers have to contend with. Many Millennial buyers choose to employ a buyer’s agent, even though this adds to the cost of purchasing a home, because they feel overwhelmed and don’t have time do to all the research. Hiring professional help is a step towards reducing information overload.
First Home Buyers
Real estate experts in Sydney say that Millennials make up around 25 per cent of their first home buyer market. Millennial buyers place a premium on being close to good public transport and entertainment such as restaurants and outdoor cafes. They are willing to give up square footage and choose smaller homes and apartments in order to afford a premium location.
In general, Millennials are older when buying their first homes than their parent’s generation. They spend more time saving, and then researching markets and searching for the best mortgages, before making an offer on a property.
Though Millennials are often older when they buy their first home, a significant per cent end up buying two or more properties and becoming landlords. Even some Millennials in their early 20s are becoming property investors, hoping to take advantage of Australia’s real estate boom.
With properties in city centres out of reach for many young buyers, some Millennials are choosing to continue renting while investing in less expensive properties in surrounding areas.
A young investor might stay in Sydney to be close to her job while purchasing a property to rent out in the suburbs. After a year or less, she can get the property re-evaluated, and if there has been an uplift in the market, she can use the capital gains to invest in another property and start building an investment portfolio this way.
This trend is especially prevalent in the western Sydney suburbs, where properties are relatively affordable but showing strong short-term growth.
This pattern is also noticeable around other capital cities, where young buyers are renting in areas where they can’t afford to buy but instead, purchase elsewhere.
Are you a Millennial buyer looking to purchase your first home, or a seasoned property investor building a retirement portfolio? Whatever your real estate needs, let Australian Credit and Finance help. Contact us today and let our home loan experts find you a great rate.