Recent research by CommBank (April 2021) has shown that almost half (45 per cent) of millennials consider property investment the most appealing investment option, followed by the stock market at 38 per cent.
These figures will likely come as no surprise, given Australians’ love for property ownership (“Great Australian Dream” anyone?), but what drives young investors to property? And could these drivers be drawbacks?
For most people, residential property is an easy first step when looking to get started with investing. This is because of its tangibility.
We can see houses, touch them, have lived in one, likely rented one and might have seen parents get a mortgage and buy one (or two), so we have a better understanding of the process and the investment. That background knowledge gives us extra confidence and comfort with the asset class.
Intangible assets, such as shares, aren’t as familiar, and investors might be more hesitant to invest if they don’t understand the mechanics of how the share market works.
While property might be favoured due to its tangibility and our comfort with the asset type, it might not be the best investment strategy for the individual and their goals.
When getting started with any investment, it’s essential to start with your goals first and then put together an investment strategy that best achieves these.
The Block, House Rules, Fixer Upper… there is no shortage of real estate and renovation television series to binge-watch.
And if you’ve ever watched one of these shows, you’ve likely contemplated your own plans to become a property flipper… buy, renovate, sell, cha-ching!
A positive of property as an investment type is that it does provide investors with a level of control over the performance and outcome of their investment. Investors can add capital value through various strategies such as renovation or development.
However, renovations require a lot of hard work, time, and planning, and it’s important to ensure investors don’t overcapitalise in the process.
While it can be financially rewarding when done correctly, property flipping isn’t a foolproof strategy, and, as with any investment, proper due diligence must still be done.
There are a number of misconceptions about the level of risk and return relative to property investments.
Investors can tend to have lower levels of perceived risk with regard to property as an asset class and investment. Again, this likely stems from our familiarity with property.
However, investing in property can be quite high risk:
While Australian housing prices have increased on average by 7.25% per year over the past 30 years, it’s important to remember that this is often cyclical and that all properties don’t perform equally.
For example, 4 bed/2 bath properties in the CBD and a house in a booming mining town will have two very different performance trajectories.
While risk is often a necessary part of wealth accumulation, it’s important that risk is appropriately understood and managed through due diligence and a suitable investment strategy.
If you’re unsure how to get started, there are a number of professionals you can engage to assist with the property investment process –
If you’re an investor that considers property investment to be the most appealing investment option, reach out today to discuss whether property is the right investment for your goals!
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
Shanley Financial Planning Pty Ltd trading as Steve May Financial Services (ABN 19 612 825 180) is a Corporate Authorised Representative of (1265706) of Sensibly Pty Ltd (AFSL 533923)
Nick Shanley, Steve May and Luke Styles are Authorised Representatives of Sensibly Pty Ltd (AFSL 533923)