For generations, buying property has been considered the most reliable path to wealth in Australia. However, a new trend is emerging among younger Australians who are increasingly foregoing home ownership in favor of investing in exchange-traded funds (ETFs).
Brielle Basmadjian, a 29-year-old tech worker in Melbourne, exemplifies this shift. Despite being financially capable of purchasing the apartment she rents, Basmadjian opted to continue investing in ETFs. "Running the numbers, it didn't make a lot of sense for me," she told the Daily Mail. This sentiment reflects a broader change in attitudes towards the "Great Australian Dream" as high property prices, rising borrowing costs, and ownership expenses reshape traditional financial aspirations.
Basmadjian, who previously owned property with a former partner before selling it after their relationship ended, has been building an ETF portfolio since she was 20. While acknowledging the potential missed opportunities from Australia's housing boom, she values the flexibility that renting and investing in ETFs provides. "Even if I dumped $150,000 into a deposit, I don't think I would actually be able to maintain my current lifestyle, the apartment I'm in and the travel that I can afford," she explained.
The data supports this anecdotal evidence. Latest ASX research indicates that nearly three million Australians now own ETFs, more than double the number recorded in 2020. Conversely, interest in investment properties has nearly halved, dropping from 36% in 2023 to just 20% by 2026. Among investors aged 18 to 29, ETFs have become as popular as investment properties for initial investments.
Eric Peterson, CEO of Trading 212 Australia, points to significant barriers to property investment for younger individuals. "Having to come up with a sizable deposit, accessing credit from a bank, paying stamp duty and broker fees are all intimidating barriers to entry," Peterson said. He noted that while stock markets can be volatile, offering long-term average returns of around 10% before inflation, broad-based ETFs provide a cost-effective way to invest across numerous securities. For instance, the S&P 500 has averaged over 15% annually in the past decade.
Jasper Twigg, a university research officer in Perth, also prioritizes ETFs while saving for a future home purchase. "If house prices hadn't surged by so much in the last few years, I probably would have bought a house already or at least looked at buying one more seriously," he stated. He noted that rising prices have pushed his home-buying goals further into the future. Renting currently allows Twigg to live in a more desirable, expensive suburb than he could afford to buy in. He remains committed to eventual homeownership but finds ETFs the most effective way to grow his savings in the interim.
These younger Australians are navigating a housing market vastly different from that of previous generations, prompting a re-evaluation of traditional investment strategies.
