At the Mortgage Institute conference in Perth last week the mortgage insurer Genworth ran an interesting side forum. They had a company poll over 1300 recent university graduates ( within 3 years of graduation) to find out what Gen Y (those born after 1976) really wanted.
We are fed information everyday about this money spending, disposable lifestyle generation so it was interesting to see the non-conforming results.
Aside: This type of study done by lenders and associated institutions is so that they can anticipate the type of loans the market wants and us as mortgage brokers can offer to our clients. So know that there is method in the maddness and lies, damn lies and statistics can prove anything. The reality is though that 170,000 students graduate each year with an anticipated 40 year employment path in front of them with an ever increasing salary, hence they are prime candidates for lenders to concentrate on. They estimate this market to be $42bill - a considerable share of the Aust mortgage market.
Now those stats as I noted them down (the report is due out soon):-
Current status of these 1300 - 53% rent ( from us
), 33% live with their parents, 14% have their own home.
When this care free, disposable lifestyle group were asked what was important to them in the next 12 months - their answers went against general perception of Gen Y opinion.
#1 Pay off Debt,
#2 Purchase a Home,
#3 Buy a car,
#4 Go on Holiday,
#5 Buy an investment property.
When asked if there was no barriers to entry ( ie deposit) would you buy property, 50% said yes they would in the next 12 months. 48% cited lack of deposit as the #1 barrier to entry.
Now this is where the lenders find out what they can do to help
It was found 43% would enter into a shared equity arrangement with a 100% lend. Of the remaining 57% when asked why they would not 38% said they would rather save the deposit, 20% said it was too risky, and a whopping 39% said they believed the lenders would benefit more than them .
So where will they buy? 54% said within commuting distance to work.
The study or demographics is fascinating, how it translates into reality is something else. So my ponderings:-
* The worry that as baby boomers retire the residential market will collapse may not be true - there is life in property yet. Aside: at the same conference an interesting presentation from Macquarie Bank showed the mortgage market growing 10% pa, I was interested that a significant part of this came from a 'change in household formation' ie divorce - another post another time..
* Lenders will actively look at introducing equity share finance, as there a few companies ready to release such products now, major lenders will follow soon. Aside: speaking to one such lender last week it was interesting in their reasoning behind monthly repayments vs no monthly repayments for such products - another post another time..
* 54% want to be within commuting distance to work. Inner city and good infrastrucutre will be key features when they look at buying property.
*100% lend comined with an shared equity arrangement may mean that the trend of trading up as your earning power increases will no longer be the norm. Remember lending for graduates can be based on future income - maybe they start with the end in mind hence First Home Owners buying >$500k
* Home loans with a holiday? OK thery were number #2 and #4 on the list - interesting incentive strategy, lets wait and see
So what do you think this all means?
The whole Gen Y selling machine is huge with books and seminars telling us what they will want and what they think. As there was only 2 of us in the Genworth session maybe Gen Y has already been dismissed as being too hard but then again as investors maybe we can start planning our exit strategy prior to our next purchase to cater for this growing purchasing base.
We are fed information everyday about this money spending, disposable lifestyle generation so it was interesting to see the non-conforming results.
Aside: This type of study done by lenders and associated institutions is so that they can anticipate the type of loans the market wants and us as mortgage brokers can offer to our clients. So know that there is method in the maddness and lies, damn lies and statistics can prove anything. The reality is though that 170,000 students graduate each year with an anticipated 40 year employment path in front of them with an ever increasing salary, hence they are prime candidates for lenders to concentrate on. They estimate this market to be $42bill - a considerable share of the Aust mortgage market.
Now those stats as I noted them down (the report is due out soon):-
Current status of these 1300 - 53% rent ( from us
), 33% live with their parents, 14% have their own home.When this care free, disposable lifestyle group were asked what was important to them in the next 12 months - their answers went against general perception of Gen Y opinion.
#1 Pay off Debt,
#2 Purchase a Home,
#3 Buy a car,
#4 Go on Holiday,
#5 Buy an investment property.
When asked if there was no barriers to entry ( ie deposit) would you buy property, 50% said yes they would in the next 12 months. 48% cited lack of deposit as the #1 barrier to entry.
Now this is where the lenders find out what they can do to help
It was found 43% would enter into a shared equity arrangement with a 100% lend. Of the remaining 57% when asked why they would not 38% said they would rather save the deposit, 20% said it was too risky, and a whopping 39% said they believed the lenders would benefit more than them
.So where will they buy? 54% said within commuting distance to work.
The study or demographics is fascinating, how it translates into reality is something else. So my ponderings:-
* The worry that as baby boomers retire the residential market will collapse may not be true - there is life in property yet. Aside: at the same conference an interesting presentation from Macquarie Bank showed the mortgage market growing 10% pa, I was interested that a significant part of this came from a 'change in household formation' ie divorce - another post another time..
* Lenders will actively look at introducing equity share finance, as there a few companies ready to release such products now, major lenders will follow soon. Aside: speaking to one such lender last week it was interesting in their reasoning behind monthly repayments vs no monthly repayments for such products - another post another time..
* 54% want to be within commuting distance to work. Inner city and good infrastrucutre will be key features when they look at buying property.
*100% lend comined with an shared equity arrangement may mean that the trend of trading up as your earning power increases will no longer be the norm. Remember lending for graduates can be based on future income - maybe they start with the end in mind hence First Home Owners buying >$500k
* Home loans with a holiday? OK thery were number #2 and #4 on the list - interesting incentive strategy, lets wait and see
So what do you think this all means?
The whole Gen Y selling machine is huge with books and seminars telling us what they will want and what they think. As there was only 2 of us in the Genworth session maybe Gen Y has already been dismissed as being too hard but then again as investors maybe we can start planning our exit strategy prior to our next purchase to cater for this growing purchasing base.
