Is Gen Z Really Locked Out of Property? - With Junge Ma

Is Gen Z really locked out of the property market? Property prices have skyrocketed. Incomes aren't really keeping up. It really doesn't look good for this emerging generation of Aussies. If you're born from 1997 to 2012, this episode is for you.

We're going to unpack how we looked investing in properties in the past four decades, what housing affordability really looks like now in 2025, and the unspoken Gen Z advantages that really no one's talking about. I'm Junge Ma, the lead research analyst at InvestorKit, and let's get into this episode. Now let's start with the comparison. In the 1980s, interest rates were high. At some point, it was as high as 20% plus, but in general, interest rates were just above 10%.

Financial environment somehow was favorable to investors. The floating of the Australian dollar in 1983 and the entry of foreign banks in 1985 really created more competition in the banking environment, and that has made it easier for investors to borrow. Taxation didn't look really favorable to investors because one, the negative gearing was partially abolished in 1985 for two years, but it was restored in 1987 because it didn't really work out. But in 1985, another thing was added. That was the capital gain tax.

It was introduced to investment properties in 1985, giving investors more burden when they sell their properties. Now affordability. In describing affordability, I'm always using price to income ratio in this episode. So in the 1980s, the price to income ratio went from 8 at the beginning of the decade to 9 at the end of the decade. So that was a 12.

5% over the 10 years. And in the 1980s, where did people buy? Sydney and Melbourne were the major hotspots at that time. People were mainly buying in the city areas, especially closer to office buildings where they work and the major amenities. People started buying in emerging suburbs in these cities, for example, Parramatta and Blacktown in Sydney and Epping or Frankston in Melbourne.

Now the 1990s, interest rates came down from the 80s. In 1990, the interest rates were above 10%, but after the recession in 1993, it became 4. 7. And over the decade, it's basically stayed around 5 to 7. 5%.

The economy recovered gradually from the 1990 recession and property price growth began to pick up in the second half of this decade. Affordability, the dwelling price to income ratio increased from 9 at the beginning of this decade to 10. 3 at the end of this decade. So that's 14% increase in 10 years. Where were people buying?

Still, Sydney, Melbourne remained the two main hotspots, but at the same time, as they became less and less affordable, people started to look at the smaller and more affordable capital cities such as Brisbane, Adelaide and Perth. Now in the 2000s, interest rates kept steady over the 2000s, still around 5% over most of the 10 years. It only declined during 2008 to 2009 during the GFC, went down to 3% in 2009. Taxation environment was favorable at this time because the 50% capital gain tax discount was introduced in 1999. So over this 10 years, investors activity was really encouraged.

Then affordability, property prices surged a lot in the early 2000s and the price to income ratio increased from 10. 3 at the beginning of this decade to 12. 8 by 2010. And that was 24% increase in a decade. In this decade, investors started to move their attention from houses to units, especially in Sydney and Melbourne.

Inner city apartment buildings in Sydney and Melbourne became a hotspot during this decade. And if we talk about houses, gentrifying suburbs in these major cities such as Newtown in Sydney, Fitzroy in Melbourne or New Farm in Brisbane became a hotspots as well. And then investors attention also moved from capital cities to major regional hubs as well. For example, Geelong in Victoria, Newcastle in New South Wales, Gold Coast and Sunshine Coast in Queensland. And we can't forget the mining boom during this decade.

So towns that were relying a lot on the mining industry like North Queensland and WA also got plenty of attention during this decade. Now the 2010s, much closer to us. Interest rates were declining down from 5% in the beginning of this decade to 0. 1% at the end of 2020. We were seeing a lot of regulatory intervention from APRA because of the high investors activity over the past decade.

APRA introduced measures to limit investor lending towards the end of 2010s. For example, they were limiting interest only lending to just 30% of all lendings. And there was a 10% cap on investors lending. Then affordability, dwelling price to income ratio increased from 12. 8% to 14%.

So in total 9. 4% increase over the decade. This increase is actually the lowest over the four decades. Now hotspots, where people were buying during the 2010s. First, gentrifying suburbs in the major capital cities or suburbs with heavy infrastructure investments.

Some examples are Green Square in Sydney, the northwest part of Sydney such as Rose Hills, Kellyville and Bella Vista, Footscray and Sunshine in Melbourne, Tramside, Springfield in Brisbane. And then we were seeing more people to invest in regional cities such as Bendigo and Ballarat in Victoria. And then we were seeing more interest in lifestyle cities such as Gold Coast, Sunshine Coast and Byron in New South Wales. And then in the end, high density apartments in major cities like Sydney, Melbourne, Brisbane were still a very sought after asset by the investors because of their high yield compared to the houses in these cities. And moving to 2020s, interest rates started to increase.

We saw it increased from 0. 1% to the current 4. 3% in just in less than two years. Affordability, dwelling price to income ratio increased from 14 in 2020 to the current 16. 5 in just four years.

And that is a 18% increase. So where are people buying now? In the first two or three years during the COVID boom, people were almost buying everywhere. House prices were surging almost everywhere in Australia. And then after the interest rates became high, affordable capital cities like Perth, Brisbane and Adelaide became the top hotspots in capital cities and affordable regions such as central to North Queensland, regional South Australia and regional WA became the hotspots among all regional cities.

So now the affordability has become so much worse if we compare it with the 1980s and house prices have surged so much. Even the most affordable cities like Townsville has seen their house prices over 500,000. So Gen Z or in general, the younger generation may think that you're basically locked out from property investment. But is that really the case? I would say if you are not looking at your backyard or the city you have grown up in or the cities or the regions where your parents were investing in, there are still plenty of opportunities for you to invest.

I'll give you some numbers here. Australia has more than 330 SA3 regions across the country. Among the 330 regions, there are still 99 of them with a median house price under 600,000. And in those 99 regions, 46 of them have achieved above average growth over the past 10 years. By above average, I mean 7% plus annualized growth.

And you may ask, yes, they have achieved above average growth, but what if we compare it with a really major cities like Sydney? Well, 38 of them actually achieved better than Sydney performance if we consider the last 10 year growth. Here are some examples for you. So Greater Sydney has achieved 6. 7% annualized growth over the past decade.

In the same time, Mount Gambier, a South Australia town, has achieved 6. 8% annualized growth over the decade. And Maribyr, a regional city not too far from Brisbane, has achieved 7. 4% annualized growth over the past decade. And in Tasmania, there's a town called Devonport.

Its last 10 year annualized growth was 7. 5%. And then if we come back to Adelaide, there is a region called Playford, and its last 10 year annualized growth was 8. 2%. So if you look borderless Australia nationwide, there are still plenty of options with a healthy local economy and good long-term capital growth.

And besides that, one thing I would like our young friends to remember is that you have some advantages that your parents didn't have. The first advantage is that now you have more access to information and data than your parents ever had to help you make a better decision to achieve higher potential growth than your parents could have. Now you have free access to all the ABS data sets to learn about a location's economic strength. Now you have access to suburb profiles by realestate. com or domain.

com to see all the trends happening in a suburb. Now you have free access to, for example, SQM research to see all the data market trends, vacancy rate trends, or stock market or supply level trends in each capital cities or each postcode. And if you're willing to pay, you can get access to, for example, Corelogix, RP Data, SQM's paid services, and a whole range of property data analytics websites. The second advantage here is the flexibility in work arrangement. By that, I mean in the 1980s or 90s, our parents, if they would like to save time on commuting, they had to live closer to their job, most likely closer to the CBD.