Soaring dwelling prices, which in NSW alone average over $1.2 million, have effectively barred many millennials from entering the Australian property market, according to Dan Miles (pictured above), managing director and co-chief investment officer of Innova Asset Management.
“Unfortunately, a generation of younger Australians have become the collateral damage to rising property prices,” Miles said.
“Many younger people who can’t rely on parental wealth or an inheritance have been effectively locked out of the property market, without the funds to be able to afford a deposit for a home or maintain a mortgage.”
Miles pointed out that leverage, or the use of debt to purchase property, has significantly contributed to inflating residential property prices, benefiting older generations while disadvantaging younger ones.
“Loan-to-valuation ratios regularly stretch beyond 80% while some governments have backed schemes allowing up to 98% of a property’s value to be borrowed,” he said. “That amount of debt can turbocharge even nominal price gains given the median house in Sydney is now valued at almost $1.4m.”
As the housing market remains unattainable for many, Miles suggested that superannuation could offer a viable alternative for wealth accumulation.
“While there are strict rules that prevent super funds from using leverage, perhaps it’s time to reconsider those rules given the superannuation system has been established for decades,” he said.
The Innova Asset Management leader argued that moderate leverage could enhance returns, making superannuation an increasingly attractive investment avenue.
Miles called for a re-evaluation of superannuation policies to assist younger generations in overcoming the barriers to homeownership.
He contended that investing in superannuation, potentially with the use of leverage, could serve as a critical strategy for financial security, especially as political solutions to the housing crisis remain elusive.
“It may not be enough to solve the housing crisis on its own, but it deserves further consideration as a generation of young Australians face a long wait for political solutions to the current housing crisis,” Miles said.
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