Property

The Great Australian Dream: Property Ownership

Property Ownership

Millennial Minds: Property or Investment Portfolio?

The Great Australian Dream: Property Ownership

Research by CommBank has revealed that 43% of millennials are investing to create wealth and achieve financial independence. Among these young investors, 45% favor property investment, closely followed by the stock market at 38%. But what drives millennials to choose property over a diversified investment portfolio? And are there potential drawbacks to this preference?

1. Tangible Appeal

For most people, residential property serves as an accessible entry point into the world of investing. Its tangibility plays a significant role. We can see houses, touch them, and many of us have lived in one or rented one. Perhaps we’ve witnessed our parents navigate the mortgage process and buy property. This familiarity gives us extra confidence and comfort with real estate as an asset class.

In contrast, intangible assets like shares can feel less familiar. The stock market’s mechanics might seem complex, leading some investors to hesitate. While property’s tangibility is appealing, it’s essential to recognize that it may not always be the best investment strategy for everyone. When starting any investment journey, begin by defining your goals and then tailor your strategy accordingly.

2. The Trendy Factor

Reality TV shows like “The Block,” “House Rules,” and “Fixer Upper” have fueled our fascination with real estate and renovations. If you’ve ever watched these shows, you’ve probably daydreamed about becoming a property flipper—buy, renovate, sell, and cha-ching! Property investment offers a level of control over performance and outcomes. Investors can enhance capital value through renovations or development.

However, property flipping isn’t foolproof. It requires hard work, planning, and diligence. While it can be financially rewarding, remember that property investment is a long-term commitment due to high transaction costs. Plus, you can’t sell off a bedroom for quick cash if needed!

3. Misconceptions and Risks

Misconceptions abound regarding property investments. Investors often perceive property as less risky than other asset classes. This perception stems from our familiarity with real estate. However, investing in property carries its own risks:

  • Lack of Diversification: Property investments often involve purchasing a single asset with substantial value. Diversification is limited, putting all your eggs in one basket.
  • Borrowing and Gearing: Many property investors borrow money to fund their purchases. While gearing can magnify gains, it also amplifies losses. Rising interest rates can impact your financial responsibilities.
  • Property serves as a growth asset, typically implying a higher risk for potentially greater returns, especially over the long haul. Although Australian housing prices have seen an average annual increase of 7.25% over the past three decades, it’s crucial to recognize the cyclic nature of this trend, noting that not all properties yield equally.

While acknowledging risk as a pivotal factor in wealth accumulation, it’s imperative to comprehensively grasp and manage it through diligent research and an appropriate investment strategy.

Whether you lean towards a portfolio or property investment as your preferred avenue, don’t hesitate to reach out today to explore whether they align with your goals!