Young couples are increasingly leaving real estate investors in favor of exchange trade funds because of the high prices of real estate.
The love affair of Australia with buying investment houses is decreasing because younger investors are increasingly turning to cheaper barter trade funds or ETFs.
Talking real estate investments used to be a common conversation around the Sunday barbecue, but recent figures show that it has become out of favor as house prices become more and more out of reach.
ETFs have filled that void. They follow indexes such as the ASX 200 and can be purchased for just a few hundred dollars.
The funds quickly become the cheap alternative with a low risk of real estate and offers broad exposure without the burden of loans of million dollars, tenants or maintenance.
And that broad exposure has made them attractive for a cohort of Aussies that would have rented in the past in buying traditional shares – and the volatility that can come with it.
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Kuung Sheng and his Dai have invested heavily in ETF.
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Alex Vynokur, the CEO of ETF trader Betashares, said that more than 2 million Australians now used ETFs to build wealth outside ownership – and around 500,000 of those investing were younger than 35.
“The obstacles for ownership of real estate grow for most Australians. In contrast to the property of real estate, building wealth through ETF’s becomes more accessible,” he said.
“Younger people have acknowledged that ETFs are a handy and cost -effective way to build wealth.”
Betashares -data showed that the ETF industry achieved a new record high in August, reached slightly less than $ 300 billion, an increase of $ 10.2 billion or 3.52 percent on the previous month.
The growth from the year until August was $ 79.2 billion – around 36 percent.
These figures are a stark contrast with where the national industry was at pre-pandemic in 2019, when ETFs had around $ 50 billion in assets.
Young couples turn to ETFs to build their wealth.
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ETF growth dwarfed increases in the activity of real estate investors. The volume of loans issued to investors increased by 0.8 percent during the year to June, with the value of investor loans that rises by 6.9 percent.
The activity of the investors of real estate had fallen in the years prior to 2024 as a result of rising interest rates and historically low rental yields in markets such as Sydney and Melbourne.
Finder.com.au InvestingSexpert Kylie Purcell said that ETFs have risen in popularity because house prices have been out of reach and they are often seen as less research to buy than shares.
“Australia has always had a love affair with real estate, but for younger generations it is more and more out of reach,” she said.
“ETFs have become the following best because they are accessible, low costs and not binding you to one. For many Gen Z investors, ETFs are now the first step on the investment ladder, where real estate was for the generation of their parents.”
The convenience of buying and selling ETFs through different apps gave them an advantage, she added.
The Aussie dream to buy real estate is than ever difficult for young Aussies who want to build up wealth.
“Gen Z and younger Millennials are digital natives. They are used to gaining access to financial products on their phone and ETFs fit so perfectly because you can trade them through an app within a few minutes.
“With one trade you don’t put all your eggs in one basket like you are with a single investment property.”
Kuang Sheng, 35, has become a productive ETF investor in recent years and said he preferred the convenience of buying.
“The ease of use is the most important thing,” he said.
“There is a lot of overhead in the trade in real estate. You have to pay a real estate agency, the broker, the banker, the lawyer. It is usually a huge transaction.
Young traders say that ETFs mean that they do not put all their eggs in one basket. Photo: Newswire / Damian Shaw
“With an ETF it can be small bags of money every time. And if you regret having bought one, you can repair it because the ASX acts every day.”
Mr. Sheng said he believed that there was more money to be earned in more liquid assets than in real estate.
“You can do it the following year or so well, because prices with all interest rates are rising, but if you look at a horizon of five years, a good portfolio with ETFs can perform better than the housing market and have fewer overhead costs.”
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