The smashed avo generation are turning to stocks instead of houses
Link copied to
Australia could be seeing the start of a new generation whose nest egg comes from stocks, not property.
It’s hard to think of a wealthy person over 40 today who doesn’t own a home, but the perfect storm of high house prices and low interest rates may be sending property deposits into the share market.
The fastest growing demographic of sharemarket investors are now 18-24 year olds, according to an ASX report on who is investing where.
The proportion of people in that age group making their first stockmarket investment has doubled over the last five years.
The next fastest-growing ASX demographic are 25-34 year olds. Share ownership among that group shot up 65 per cent over the same period.
The figures dispute demographer Bernard Salt’s claim last year that young people are wasting money on expensive breakfasts instead of saving for a home deposit.
The ASX found fewer than 20 per cent of 18-24 year olds are playing the market to grow a house deposit — suggesting they are in the stock market to stay.
The report comes as a Melbourne University HILDA survey found that home ownership rates for young people are at rock bottom. The rate of home-ownership among 18-39 year olds fell from 36 per cent in 2002 to 25 per cent of all owners in 2014, while mortgage debt for the same age group almost doubled.
It’s a trend that will continue, analysts say.
“I think young people are a bit turned off by property given that affordability has deteriorated so badly, and that maybe a factor driving them elsewhere,” AMP Capital economist Shane Oliver told Stockhead.
“That (property) money must be going somewhere.”
Rockstar tech stocks
It would be hard for young people to ignore the fact that the share prices of Facebook, Google, Apple and co — products they use every day — have been the rockstars of global share markets, Mr Oliver said.
Long-term returns from the ASX and property are around 11 per cent. However Mr Oliver said there’s a risk that property as an asset class — for investors in Sydney and Melbourne — may not be the best option right now given the large amount of housing stock coming on line and regulator determination to cool the market.
“It could be time to avoid (property). Shares will always have their corrections but the sharemarket hasn’t had the same kind of run-up as the property market.”
The average young investor — those 18-24 year olds — are risk-averse, preferring stable returns over exciting tech stocks. As a group they tend not to be more heavily invested in one asset class than older generations, with 44 per cent holding cash, 31 per cent owning shares, 25 per cent having an investment property, and 22 per cent owning on-exchange investments such as derivatives.
The ASX findings do have some oddities though. Young investors are far less likely to use financial advisors, believing them to be expensive — and are more likely to use robo-advisors. Yet they are the least likely to use cheap online brokers and more likely to use full service brokers than older generations.
Sarah Riegelhuth, CEO of Gen Y-focused advisory Wealth Enhancers, says young investors tend to be a bit more hesitant to get started as they don’t have much experience, but are happy to start small and take advice.
“For some Gen Y there is a keen interest in investing in startup companies, and we see a lot of this happening among our wealthier Gen Y members. Property can be less enticing to them, although it’s still a very popular investment class, because shares are so much more accessible and require less initial capital and ongoing commitment.”
‘They ask a lot of questions’
Whether companies are ready for millennials on their share register is another question.
Philip Daffas, CEO and managing director of biotech company ePAT (ASX:EPT) said executives needed to recognise young people as key future investors — and be prepared to answer their detailed questions.
Mr Daffas himself was surprised when two university students walked into his company’s AGM and proceeded to grill the board.
“We had just relocated to Sydney so we didn’t really expect anyone to show up, and anyone who did, we expected to be a more mature, male investor,” he said.
“What was remarkable was the depth and quality of the questions they asked, demonstrating they had a deep understanding of the business and market opportunity.”
Mr Daffas said boards would need to work harder to help young investors understand the realistic term required to see a return and the related risks of the stock, and be well prepared to answer detailed and complex questions that they may not get with more seasoned investors.