Young Aussies struggling with property prices turn to ETFs

Young couples are increasingly abandoning property investors in favour of exchange trade funds due to the high prices of property.

Australia’s love affair with buying investment properties has been waning as younger investors increasingly turn to cheaper exchange traded funds, or ETFs.

Talking property investments used to be a common conversation around the Sunday barbecue but recent figures show it has been falling out of favour as home prices get increasingly out of reach.

ETFs have filled that void. They track indexes like the ASX 200 and can be bought for just a few hundred dollars.

The funds are fast becoming the low-cost, low-risk alternative to property, offering broad exposure without the burden of million-dollar loans, tenants or maintenance.

And that broad exposure has made them appealing for a cohort of Aussies who in the past would have shuddered at buying traditional shares – and the volatility that can come with them.

Kuang Sheng and his partner Yang Dai have invested heavily in ETF.

MORE: ‘50c’: Aussies expose cost of full-time boat life

Alex Vynokur, the CEO of ETF trader Betashares, said more than 2 million Australians were now using ETFs to build wealth outside of property – and about 500,000 of those investing were under 35.

“The hurdles to property ownership are growing for most Australians. Unlike property ownership, building wealth through ETFs is becoming more accessible,” he said.

“Younger people have recognised that ETFs are a convenient and cost effective way to build wealth.”

Betashares data showed the ETF industry hit a new record high of just under $300 billion in August, a rise of $10.2 billion or 3.52 per cent on the previous month.

Growth over the year to August was $79.2 billion – about 36 per cent.

These figures are a stark contrast to where the national industry was at pre-pandemic in 2019, when ETFs had about $50 billion in assets under management.

Young couples are turning to ETF’s to build their wealth.

MORE: ‘Kiss my a**’: Block team blow up after losing

Second ex-wife: Harrison Ford’s $23m payout

ETF growth dwarfed rises in property investor activity. The volume of loans issued to investors increased 0.8 per cent over the year to June, with the value of investor loans increasing 6.9 per cent.

Property investor activity had been declining in the years preceding 2024 due to rising interest rates and historically low rental yields in markets such as Sydney and Melbourne.

Finder.com.au investment expert Kylie Purcell said ETFs have surged in popularity as home prices have got out of reach and they’re often viewed as requiring less research to buy than shares.

“Australia has always had a love affair with property, but for younger generations it’s increasingly out of reach,” she said.

“ETFs have become the next best thing because they’re accessible, low cost and don’t tie you to a single asset. For a lot of Gen Z investors, ETFs are now the first step on the investing ladder, where property was for their parents’ generation.”

The ease of buying and selling ETFs through various apps gave them an advantage, she added.

The Aussie dream of buying property is hard then ever for young Aussies who want to build wealth.

“Gen Z and younger millennials are digital natives. They’re used to accessing financial products on their phone and ETFs fit that perfectly as you can trade them through an app in minutes.

“With one trade, you’re not putting all your eggs in one basket like you are with a single investment property.”

Kuang Sheng, 35, has become a prolific ETF investor over recent years and said he preferred the ease of buying.

“The ease of use is the most important thing,” he said.

“In property trading, there is a lot of overhead. You need to pay a real estate agency, the broker, the banker, the lawyer. It’s usually one huge transaction.

Young traders say ETF’s mean they’re not putting all their eggs in one basket. Picture: NewsWire / Damian Shaw

“With an ETF it can be small pockets of money each time. And if you regret buying one, you can fix it because the ASX trades every day.”

Mr Sheng said he believed there was more money to be made investing in more liquid assets than in property.

“You might do well over the next year or so because prices are going up with all the interest rate cuts, but if you look to five-year horizon, a good portfolio with ETFs can outperform the housing market and have less overheads.”

MORE: ‘Volatile’: Woman’s ‘violent’ Aus street life

54,000 short’ Albo’s big promise won’t be met

The post Young Aussies struggling with property prices turn to ETFs appeared first on realestate.com.au.