Latest / Money Grows on Trees / #338 - Should Gen Z Buy Property In Australia?

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#338 - Should Gen Z Buy Property In Australia? · Money Grows on Trees

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If you're Gen Z, buying property in Australia right now might be the worst
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financial decision you could make. Most people think property is the
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only way to build wealth because it worked for their parents. But
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the reality is the four engines that drove the last 30 to
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40 year property boom are all reversing at once. And
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affordability is the worst on record. I'm
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Lloyd J. Ross, seven figure investor and entrepreneur. And I've helped thousands of
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everyday Australians, Americans, New Zealanders and Canadians get out of debt and
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build real wealth. And in this video, I'm going to show you if it's worth buying a
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property and show you some alternative strategies to actually build
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your wealth. Let's start with the dream. The just
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buy a house advice was correct in your parents' era,
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but it's now running on numbers that no longer exist. So
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the national median dwelling value is about $920,000. So
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close to a million dollars. In Sydney, it's
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actually $1.4 to $1.7 million. For
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a three bedder, renovated kitchen, you know, if it even
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has a kitchen. So here's the thing. The average
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household now needs about 11 years to save for
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a 20% deposit. That's to forego mortgage insurance. 11 years
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just to save for a 20% deposit after rent and
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living costs, which we know are skyrocketing. Okay, so
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the average deposit being roughly around $170,000 or $200,000, right, in some instances. So
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only 14% of median income households can actually afford a median home today.
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Can you believe that? 14% of median income households can actually afford a
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median home today, 14%. That's down from 43% just three years ago. 43% three years ago versus 14 today,
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right? And
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in Sydney, it's 10%, 10%, right?
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It's not a tough market. It's one that structurally walked away
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from normal people. So this is why it won't magically
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fix itself, because it's chronic under supply, right?
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We're going to miss the target of needing about 260,000 homes. And
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while there's constrained supply because of inflation of goods and
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services, constrained zoning, multitude
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of different things, rising interest rates, that's hurting the demand side. But whilst
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the supply side is constrained, there's also massive
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immigration, right? So we're stuck
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until one of those, or both of those is alleviated at the same time. So
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all the tailwinds to cause property to
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move up have happened all at the same time. We
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have had interest rates drop from 17% to zero,
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that happened. We've had the other spouse enter the workforce in
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full flight, that's happened. We've had loan terms extend to 30 and
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now up to 40 years, which has happened, and we've also had We've
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also had the immigration numbers just explode, like boom.
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And so all those things coupled together, they have to repeat for
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us to have the same growth. And right now we're at the very top of
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the housing cycle that's now starting to come back. I believe Sydney's now already
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fallen 10% since the budget measures came into place. It's already, Melbourne
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and Sydney are already in correction territory, in the property market.
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And so those other cities like the Gold Coast and so forth, that will generally follow
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those other markets down. And
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rates are still going up. They're not even stopped yet. They're still going up.
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So I don't think all of those things are going to really
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help grow the property market. So I
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think we're basically sitting at the peak of one of the greatest real
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estate growth stories in human history. Human history. Australian housing,
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it's compounded 7.5% a year for 25 years.
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One of the longest, biggest booms on the planet. We
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turn shelter into a national sport and a
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personality type. Are you an investor or not? You're a property investor or not, right? And
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it's the worst on record in terms of affordability. Think about it. 14% can afford it,
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down from 43%. Right?
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And it's not the, so it's not the start of a run. This is what a top
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looks like. Okay? So rates are
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now 4.35%. The market's pricing in more
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rates. Oil, as of this morning, what
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are we now? The 2nd of June, 2026. And
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we're now seeing that the negotiations with
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Iran have now gone to zero. Like, there is no deal now. Just
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as this morning. And oil's already up 5% this morning. So
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as oil moves to $160 a barrel, we're going to see
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a spike in inflation across all goods and services, which will likely increase
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or hold interest rates for longer. Immigration is
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now top of mind, top of policy, top
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of discussion for parliament. And
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it's the reason why One Nation, which is Pauline Hance's political
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party, has now overtaken Labor as the preferred
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party. like 30% versus 28%, and it's completely blindsided
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liberal, and it's now the opposition party. The reason for
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that is because immigration. People are just tired of
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just immigrating all these people into the country, unchecked,
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not even skilled, not even the people we need, and it's just
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causing more inflation, and more cost of living problems,
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and more rental crisis. Like, it's just worse. And people
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will say, oh, well, you know, it's not immigration. Oh, fuck it, it is. Are
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you a numpty? If you have a specific set of land available for people
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and housing and you pour people in, what do
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you think's going to happen? You'd have to be an absolute You
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need to read more books if you think that's actually not going to have an
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impact. Of course it will. Yes, supply is one part of it. But they're not alleviating
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supply. So where's the other thing to turn off? It's demand. It's
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demand. It's just a no-brainer. Stop
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bringing people into a country when there's not enough housing. You don't have
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to be a rocket scientist to work that out. You have to have an IQ of 70 to
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know that. And people are like, no, no, no. And they're not reducing
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the numbers. The numbers have gone up. And
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this is why you're going to find, to
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get to my point, immigration will be wound back. It will be.
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And look what has happened in New Zealand. They wound back net
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migration. Real estate collapsed. They
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wound down in a big way in Canada, immigration and
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real estate down, yes? You're seeing rents alleviate.
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I think rents in Canada are way down. Forget about real estate prices, rents
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are like 30% down in some areas of Canada. It's a great, it's a fantastic, this
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is what you want. Like how many of you want higher rents? And I
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know there's gonna be some landlords going, well, I just bought a property, you know, well, you
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know. You bought it for too high a price. What can I say? Don't
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buy assets on real estate when interest rates are 0%. Because
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when rates go up, asset values fall, you know? Just quickly, if you're ready
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to take control of your finances but feel stuck on where to start, I
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have a solution. My book, Money Buys Happiness, simplifies
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investing and wealth building with practical steps to help you achieve financial
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peace. Get your copy via the link in the show notes and let's get your
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money working for you. Now back to the episode. So, We
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want lower rents for people. We don't want to turn shelter into a flippant national sport.
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And the global cycle is already starting to turn, right? And you're starting to see now
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what's happening. So we are seeing signs of it in other countries. We're seeing signs
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of it. We've seen it in China. Real estate has gone nowhere for 20 years, right?
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Real prices have fallen by 20% out there. In the USA, massive
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falls in real estate prices, probably the worst since the GFC. So
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we're seeing in all these Western democracies, we're seeing real estate prices
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come off the ball. Certainly London's come way off the ball. It used to be pumping out there.
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We're the only one left. We're the only market really
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left where we're at the peak of this bubble. Because
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we were late to the party a little bit. And so we're going to see, we're
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going to see it, we're already, not even we're going to see, you're starting to
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see it already. And you're starting to see what happened in the last 12 months when
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people went in for a 5% deposit because their parents said, get on the property ladder, get
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on there. So, oh shit, I better get the 5% deposit together and do it.
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And all of a sudden, bang, they bought a, I think it's capped at a million bucks
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in most cities, I think in Sydney it's 1.5, but they bought a $1.4 million
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house, 5% deposit, and only less than six
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months later, it's already fallen in value by 10%. So
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they're already in, so if you've put a 5% deposit and cash equity, and
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the property's fallen by 10%, you're negative 5% equity, which means
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you can't refinance now, which means you can't sell it without
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having to pay back that 5%, which means you're stuck, which
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means you're gonna see a lot more mortgage and possessions. So when I do a flippin' rule,
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and I say, Gen Z shouldn't buy a flippin' property, I meant it,
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I wasn't mucking around. And all the people going, oh, you're fucking with the bad advice. No,
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it wasn't. It was excellent. It
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was very good, which is probably why it went viral. Because
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people are smarter than you think. I think it was a stupid thing
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to run in and buy a property at 0% interest rates during COVID
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and then to go to the 5% deposit. Dumb, dumb, dumb. Now,
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if you can handle that with your income, makes more sense. If
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you don't put yourself in a position where you don't need to sell the
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property for the next 20 years, fine, makes a bit more sense. So
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there's certainly times where that makes sense, but that's not what people are
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saying. They're just saying, get on the ladder, get on the ladder, get on the ladder, get on. It's
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all this pressure for these young people to get on the flipping property ladder. I
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had a young guy message me yesterday on Instagram and he said, Lloyd,
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I'm 24. and I've got a
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potential to build this great business, generate lots of income, or
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do I get on the property ladder? I'm thinking, oh my God, who has brainwashed this
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young kid to think in your 20s the most important thing is to get a house? The
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return on equity of a home, based on all the things I just mentioned,
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are gonna be shit. Do you understand? They're gonna be shit.
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Which part of those metrics tells
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you that property's gonna grow well in the next 10 years? Which one? I'll
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wait. I'll just wait, you tell me. No,
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because there is none. Oh, Lloyd, but supply, sure. But as soon as you stop
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immigration, that dies. Even if supply
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was constrained as it is, it's still not going to mean it's going to grow. It's probably just
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going to flatline. It's already falling. So what do you tell
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a young person? Yes, get in the property ladder right away so you can lose 20% of
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the value in the next five years. Do that. That's a
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shit, that's a shit idea. How can
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you possibly be so negligent to tell young people to go off and flip and
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buy bricks and mortar, they're gonna fall in value. How can you do that? Just
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because you're in the club, you want them to be in the club? You know, how
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can you repeat the last 40 years of the macro effects and the massive
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tailwinds that have had real estate growing in value so much? You can't. You
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can't give them the same advice. Young people ought to
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be focused on how they increase their skills, how they increase
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their income, how they start and build businesses. That's the one
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thing. And Dave Ramsey says this so often, the income
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is your number one wealth building thing. That is the number one most
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important thing. It's not necessarily assets in the early days, it's skills and
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it's income, right? And I think what's great about shares
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is you get to either select the specific shares that you buy,
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you know, that you buy that do well during these
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challenging moments. Like for example, I've mentioned this in the podcast before. I've got, you know, substantial
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amounts of our portfolio in oil assets. I get to choose that
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oil is going to do okay in the next year or two or whatever. And I get
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to participate in growth when real estate falls. I get to do those.
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You get more flexibility and optionality in shares than you do in real estate. You just do.
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You can select companies to buy and own. You can, and
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even Even in certain indexes, you're going to get a multitude
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of different companies that do well when real estate falls. You will. Like
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if you buy, for example, in the Australian index now, you're getting BHP. I
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don't know if people know this, probably don't know this, so I'll tell you. There's like a 50-year
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shortage in copper. Structurally, they can't build
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copper mines very quickly or very easily. And so the lead
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in time of a copper mine is like 10 or 15. It's a long time. So
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you're going to have a set number of copper mines, and you're
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going to have massive structural undersupply in copper, because it's going to be a
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lot of demand from the onset of AI and data
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centers to have a lot of copper. So there's a 50-year structural undersupply in copper,
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massive undersupply. So of course, if you own shares in indexes where
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you've got BHP in it, and BHP's half of its earnings,
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half of its profits, are from copper. It's probably why
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BHP's up 20% this year while real estate's flatlined.
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Do you understand? You do get more optionality when
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you understand buying pieces of companies or
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index funds. You just do. You just get, and you get more liquidity. And
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so, what should young people
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be doing? Do I think they should be running off and buying a house at Gen Z? No,
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I think it's a dumb idea. Let me repeat it. I think it's a stupid idea.
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because they don't have the income to support it. And they haven't probably done
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the sums on the operating costs. And they probably haven't done the sums on what's gonna happen the
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next five years in real estate. Probably gonna go nowhere. There's a massive opportunity cost
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of that. You know, and while they're too busy clamoring
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over to try and buy, you know, save a deposit, buy a house, and get mom and
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dad to be guarantor, their whole life is
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consumed by this one goal. And they forego learning AI.
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They forego learning business. They forego learning skills. They forego taking
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risk. The biggest thing you can do in your 20s is take risk. if
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you want to build wealth. And if you got a mortgage and you got a house and that's the
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one thing, then all your risk is in debt that's
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on bricks and mortar that's probably going to go nowhere. That's where your risk is built.
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Why? You're better off to... I mean,
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I follow Jim Penman on X. He's a wonderful
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guy. We follow each other and he's famous for Jim's
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mowing. Now, Jim's window cleaning. But
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he's a very well-known famous Australian entrepreneur. And
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he said, you know, and he agrees with all the things we talk about
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in the podcast too, about immigration and so forth. But you know, Jim said, you know,
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why would you buy a property when you can buy Jim's franchise?
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And I agree with that. I think, yeah. But I mean, buy something.
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Either buy a business in place, buy a franchise, as long as you've done
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the numbers and it makes sense. and learn and get
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into business. You're going to find financial
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independence in a business long before
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you're ever going to find it in property, let me tell you. All
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of my financial independence, most
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of it, is because I've got businesses. Most
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of it is because I've built skills. Most of it is because I took risk in
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my 30s that wasn't real estate risk. That's
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why I have and certainly took risk in shares.
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But the shares produce income, which is great. As I've said before,
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to the Gen Zers in here, it pays our rent. I still rent. I'm
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a very proud peasant renter because the capital is just
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better used in other areas. And you've got to think about this. It's capital you're
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deploying. So you get to choose like, do I deploy my capital and
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risk and time into bricks and mortar right now at the peak of a real
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estate cycle? Or do I deploy my capital into a
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business or building business skills or into perhaps something
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with more optionality like an index fund? You know? More
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liquidity. Because you can always liquidate that and buy a business. It's
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just hard to do that in real estate. And I do think that now with what's
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happening with the budget, there's going to be less
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incentive for you to buy and invest in real estate. So
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when I go back to that reel that I did on Instagram, if you scroll back far enough, not you're going
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to, but if you did get them, you'll see, I think you've got a
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million, you know, there's a lot of contention in the comments and
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I've got absolutely fucking like they were bang, bang.
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It was the worst advice ever worse, but it wasn't because I
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recorded that in 2026. So I would say it's probably one of
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the better things that I've told people to do because You
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know, just woe your horses on following
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your parents into something that worked for them for the last 40 years, because I'm here to
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tell you, the same tailwinds are gone. They don't exist
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anymore. So my, to summarize this,
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when would it be an effective time for you to buy a house? I
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think there's some intelligence around if
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you found a place genuinely that you like to live, that's
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where you can see yourself living for the next 20 years, and
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your rent is commensurate, fairly commensurate, which is
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not at the minute, to the repayments,
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And you have more than a sizable deposit than 5%. You know,
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you've got a 20% deposit. And you understand that rates
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can go up and you can handle that because you've got a buffer account and you've got sensible
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income. And you've got a way to continually
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drive sensible income and your job's not at risk from AI and you feel
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pretty solid about that. Like if you're moving into a home like
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that, you're probably not a Gen Zer. You're
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probably a millennial. So this whole
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notion of like Gen Z should buy, it's true, like millennials maybe want
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to consider it or boomers, but if you're a Gen Zer, it's
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been lasting on my mind. If you're a Gen Zer, the last thing I'd be thinking
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about is property, let me tell you. I didn't buy property and I
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can tell you that most people, the life that I live, I'm going to Vietnam tomorrow,
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I'm going to Thailand for a couple of weeks. Most people would trade that life
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for theirs and I didn't buy it, have not owned property. No
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direct residential real estate. For that matter, I have no
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property. None. So it's like, do you optimize your
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life for bricks and mortar? Or do you optimize your status and tell
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everyone you own a house? Write a passage? Or do
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you optimize your life for happiness and adventure and
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joy? And I just think there's so much more to life than bricks
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and mortar. So I hope that gives you a bit of an idea of
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what I mean when I say Gen Z shouldn't buy a house. I
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hope this gives you, puts some meat on the bone of that, you
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know, 60-second reel that I did because if
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you look at it and look at the numbers and you understand the
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opportunities out there for Gen Zers with AI and business and
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online business and geo-arbitrage, being able
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to live in a place that's low-cost, I
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think buying a house in Australia is probably the worst thing they could do. And
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if you understand the numbers now because I went through them, you probably agree with
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me. Right? So, I'd
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love to know in the comments, do you agree with this
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or not? Do you think Gen Z should rush out right now
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in 2026 as I'm talking about this in June and buy a property? Do you? Pop
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below, yes or no. And if you think they should do something else, do you agree with me that they
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should get into business and look at other things and other ways to get ahead? Because it
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seems like that's not an effective way. What do you prefer? What
18:38
do you think? Am I flipping on crack here or what? Or am I speaking
18:42
sense to you? Hit the subscribe button if you love the no BS approach
18:45
we've got on the show and pop a question in the comments below and
18:49
we'll come and I'll answer them for you in there as well. All right, see you in the next episode. listening
18:53
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