The Unconditional Blog

The impartial voice of the industry

 
6

Baby boomer generation still sees the appeal of property

Posted on: July 11th, 2009 | Filed in Buying / Selling a home, Property Investing

Whilst by no means a statistically fullproof survey I was interested to read of 2 recent online surveys undertaken by the GrownUps.co.nz website – specifically targeting the demographic of the over 50’s – the baby boomer generation.

The first survey was undertaken in late June and asked the question “Are you considering buying or investing in property over the next 6 months?

GrownUps.co.nz website survey - property buyingThe results which provide an insight into the type of property that people are thinking of buying is most illuminating in that 75% stated that they are not considering buying or investing in property over the next 6 months – which by inference means that 25% – a full quarter of the 426 who took part in the survey are considering buying.

I found that very interesting set against the past 12 months of concern over property investing and the uncertainty of the property market especially within this baby boomer generation who by all accounts were disproportionately impacted by the finance company fallout.

Additionally the figure of 25% allowing for margin of error which in this same could be up to 8% would still mean 1 in 8 of this segment could be interested in property buying – far above the national average of 1 in 20. Consideration needs to be given to the fact that the survey was undertaken on a website which may be more representative of a higher socio-economic group.

The second survey undertaken by GrownUps just this week is also illuminating as it went on to seek response to the question “What are you most likely to invest in during the next 6 months?

GrownUps.co.nz website survey - investingThe results of this survey seeks to identify the interest in investing options for this baby boomer generation.

Most telling is the nearly a third of the 480 participants that state that “doing nothing” is their prefered action in regard to investing – not altogether surprising given the recent and current financial climate.

A quarter felt the bank safe deposit environment was the best option, as with 16% who felt that paying off debt was the best form of investment.

However a not insignificant 6% stated that their intention was property investment – that would equate to 1 in 17 of this every growing sector of the population. Again as against the current proportion of homeowners currently in the market based on current sales, if this representation of baby boomers were to go through with their intentions expressed in the survey it could have a part to play in the property market in the coming 6 months.

Clearly these surveys are a snapshot in time and provide no trend analysis to show movement as compared to prior year, but can be useful in observing the intentions and views of this influenctial proportion of the population.

Article Discussion

  1. Ross Brader says:

    We have certainly noticed that the baby boomers purchased many rentals earlier in the year at prices that were about 15% down on peak and securing an interest rate of 5.95% fixed in some cases 5 years with ASB.

    Many of these purchases were close to breaking even despite borrowing 100% using the family home as additional security for the loan.

    On the other hand some simply took the lump sum out of the bank and purchased a property with no mortgage or split the figure over two properties and had each property 50% geared.

    But that baby boomer investor activity seems to have slowed drastically as 3 and 5 year fixed rates have increased quite rapidly and now make a break even scenario difficult to find.

    The baby boomers don’t seem too keen on buying with a floating rate mortgage even though there is a chance that sub 6% floating mortgages could be with us for some time.

  2. J.C. says:

    Having baby boomers own the bulk of the nation’s rental stock may not actually be a bad thing. Generations X and Y would be better off becoming long-term renters and using their money for constructive purposes (as opposed to competing with the boomers in trying to buy houses–a rather futile activity given the pitiful income levels in NZ and the relative advantage the boomers have in leveraging existing assets). Therefore, by letting the boomers leverage their way into de facto landlord-ship of the nation’s housing, younger NZers will actually be better off financially and will be free of any potential risk.

  3. Andrew Burns says:

    many gen X/Y’s will inherit the portfolios anyway, but with modern medicine they may well have to wait until they are 60. Thats a long time to have the insecurity of tennant-hood. There are many positive social benefits from home ownership including family stability and stable schooling, pride in ones environment and general nesting type behaviours, pottering outside, DIY etc. Many of these are redundant if you rent someones elses house.

  4. J.C. says:

    Andrew,

    While I understand what you are saying, I don’t think “social benefits” outweigh financial common sense (which will actually promote social stability, not impede it). One can easily find a list of disadvantages that I would think are far more important: one being labour mobility. In this day and age, when the ability to generate a decent income is paramount, taking on a mortgage and settling in one place is actually a high-risk option, particularly for younger people.

  5. J.C.

    I am interested in your earlier comment in regard to encouraging non baby-boomer generation to “use there money for constructive purposes” – I would be interested to better understand to what you believe they should focus.

    I have often read and personally believe that homeownership is one of the best ways to build financial maturity and financial literacy – the commitment of a mortgage and the other liabilities and obligations are a great model and experience for a young person, little else comes close. There is all to often a belief that people in general go into home ownership as a speculative investment whereas the drive is far more often those expressed by Andrew above.

  6. J.C. says:

    Alistair,

    Trying to outbid someone on a property who has (or more likely has) more resources than yourself is futile in my opinion. Therefore, a “constructive” use of money might be to improve your income-earning opportunities, i.e., through education or a business perhaps. I don’t see how loading up on debt is smart when you factor in market realities.

    The point that Andrew made is fair comment, but it comes wrapped in a fair bit of nostalgia and I don’t think it is so relevant for the times we live in, All I was suggesting is that people think rationally about their best interests by not succumbing to outmoded ways of thinking towards property ownership in 2009.

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