The Y factor

Generation Y makes up a large chunk of brokers’ present and future client base, and bring a different flavour when it comes to purchasing property.

Gen who?

Gen Y, Gen Next, Millennials, Baby Boomlets – whatever you call them – are in the 18 to 35 age bracket, and represent approximately 20 per cent of Australia’s population.

Spoilt, cheeky, carefree, selfish, and naïve are just some of the words used to describe this tech-savvy bunch. Gen Ys are famed for craving change and immediacy, and many of them dream of making a difference in society and for mankind. They are perceived by many as big spenders who choose to splash out on holidays, festivals, cars, and the latest gadgets, rather than avoid debt and save up for investment purposes.

But contrary to popular belief, the spending habits of Gen Ys are not quite as frivolous.

According to a 2011 survey conducted by REST Industry Super, most of Gen Y’s non-housing spending is on typical items such as groceries, utilities and transport, while less than a quarter of their spending is on entertainment, recreation and clothing.

Charlie Caruso, editor and co-author of the book Understanding Y, told The Adviser that Gen Ys are accruing more debt at an earlier age than their predecessors, the majority of which has come from the cost of studying. “Having been raised by baby boomers, Gen Y share a similar dread when it comes to being in debt, and have shown a desire to minimise debt where and when possible,” she said.

The REST survey also showed that over three-quarters of Gen Y respondents were committed to saving, with the most popular reason being for travel (51 per cent). Those aged between 26 and 30 were seen as the most likely to be saving for a property deposit, while 18- to 20-year-olds were most likely saving for a vehicle.

Bernard Salt, one of Australia’s leading demographers and the other co-author of Understanding Y, says Gen Ys just want the freedom to pursue their desired lifestyle.

“Owning property is all well and good, but I think many of them – certainly upper- and middle-class Gen Ys – would see it as a negative tie. They want to remain footloose and fancy-free. I think there is a turning point around the early to mid-30s where they start to view it the other way, but I think around their 20s there are many Gen Ys who would regard property as a bit of a drag. Like, if you’re married with children, a mortgage just completes the set,” he says.

But although Gen Ys tend to make more short-term plans and appear to be in no rush to buy a home, more and more of them are bucking this trend.

The annual realestate.com.au Housing Affordability Sentiment Index, released in July, revealed the rather dubious claim that 53 per cent of Gen Ys are already property owners – an increase of five percentage points from last year.

“As each year goes by, the level of interest and appetite that a Gen Y has towards acquiring a property and having something that they’re able to call home increases, because as people get older, they like certainty and security,” explains Tom Panos, real estate coach and general manager for real estate sales at News Corp.

Peter Andronicos, general manager of franchise group eChoice, thinks the federal government’s decision to increase the retirement age has also forced Gen Y to start thinking more long term.

“We get a lot of new first home buyers – that makes up about 40 per cent of our business – and it’s evident to us that they’re looking for a long-term strategy,” he says.

And when it comes to comparing the property goals of Gen Ys to previous generations, it seems they are much the same. It’s the way that Gen Y achieves their goals that’s different.

“Everyone has got the same goal – to own their own home,” says Matt Cunliffe, the 28-year-old general manager of Mortgage Choice in Brisbane. “I guess the difference with Gen Ys is that they want things a bit faster and have a high-risk appetite, so they’ll go straight off the bat rather than just hanging back and saving.”

Bianca Patterson, a 29-year-old mortgage and finance specialist for Momentum Wealth in Perth, agrees that Millennials are aggressive when buying property, and believes that many of them see it as an investment decision rather than a security one.

“Most of the Gen Y clients I meet want to have an established property portfolio before the age of 30, and most of them are happy to borrow whatever it takes to get them there. This is vastly different from the Gen X clients I meet, who are not comfortable investing until they have paid off their home completely,” she explains.

Ms Patterson also says that Gen Ys are more willing to pay LMI now if it means they are able to purchase their next property sooner.

What Ys want

So if there is an increasing portion of Gen Ys in the property market, what and where are they buying, and how are they affording it?

Mr Panos believes Gen Ys want the same thing that a lot of other people desire when it comes to property location – somewhere that is lifestyle-oriented.

“They want to be able to blend in their work and their personal life, and not have a major divide that forces them to travel up to an hour and a half each way every day,” he explains.

Adrian McEvoy, LJ Hooker’s franchise director for Werribee/Hopper’s Crossing, echoes Mr Panos’ belief that Gen Y’s decision on what and where to buy is purely based on lifestyle.

“They are tending to buy low-maintenance homes on smaller blocks, as they don’t want to be mowing lawns or tending to big gardens on weekends,” he says.

Some Gen Ys, such as 24-year old Sydney property owner Jeremy Iannuzzelli, share the attitudes of Gen X-ers and baby boomers in how they go about gathering the money needed to enter the market.

“My father’s been in the accounting industry for 35 years, so I’d been taught at home to save my pennies, buy a house and pay it off. It’s always something that was embedded in me from an early age that I would enter the property market,” he explains.

However, it is becoming increasingly common for Millennials to receive financial assistance via a third party, whether it’s their parents or other family members – even friends.

The report by realestate.com.au on housing affordability found that almost a third of Gen Y buyers need financial help to buy property, with about a fifth of them receiving help from their parents.

Enrizen Financial Group, a company that specialises in providing financial advice and guidance to Gen Y clients, notices the link between its younger client base and the financial support provided by their parents.

“When you look at mortgage lending in the first home buyer market, there’s probably at least 30 per cent of loans that have guarantors,” says Trent Franklin, managing director of Enrizen.

Sarah Rogers, a 24-year-old financial planner for PY Financial Services in Albury, is one of those Gen Ys who relied on financial assistance from her family, nabbing her first property at 21 years old using her inheritance.

“My parents never acted as guarantors for my properties, but I guess an inheritance is just as good. However, I have a lot of friends who received help from their parents to buy property,” she says.

Some finance companies are riding the wave of this growing trend, introducing products that allow parents to formally help their children secure a mortgage without worrying about a bank guarantee.

LaTrobe Financial’s new P2C product allows parents to decide how much of the loan they want to take on, and is designed to protect their investment without exposing their assets or credit files to any of the problems that their child may encounter with repayments.

How to turn-on Y

For brokers, there are many ways to the hearts of Gen Ys. Being fast, flexible and timely can get you in their good books. Being tech-savvy and possessing a solid digital presence wouldn’t go astray either. Even being a younger broker can work to your advantage. Here are a few tips on how to attract Generation Next.

Digital love

Constantly on the go, while juggling a variety of the latest tech devices, Millennials are hungry for information served in a fast and easily digestible manner. As a broker, you need to have a digital presence, and you need to be tech-savvy in order to speak their language.

Brokers must also be aware that Gen Ys are not easily affected by marketing gimmicks, and that they are accustomed to finding all the information and services they need on the internet.

“Speaking as someone from the Y Generation, I know that if I am in doubt about the service I am looking to use, I turn to the internet,” says Ms Patterson.

Peter Harris, managing director of digital marketing firm Vision Critical’s Asia-Pacific headquarters, says there are many ways to market to Gen Y, but companies need to make sure that the information they’re driving to this audience is mobile-friendly, easy to access and understand, and exciting enough to act on. 

Mr Harris reckons mortgage brokers can get more in tune with Gen Y by leveraging a cloud-based customer intelligence platform. He says this type of platform would enable brokers to engage with tens of thousands of customers at a time for insight that helps drive their business decisions and outcomes.

“Millennials often gravitate towards things that are trending, so being up to speed on social media conversations is key as well,” he adds.

There is no doubt that brokers need a strong social media presence to engage Gen Y and gain their respect as a thought leader, an industry expert and a trusted source. However, you must not mix your personal and professional social media profiles if you want to be taken seriously, explains Brett Spencer, CEO of mortgage software company Stargate.

“A broker’s social media presence needs to be direct, concise and above all, professional,” he says. “Consumers use social media to research what others are saying about you, and if you have a poor online presence, you will never succeed.”

Do Ys attract Ys?

Some believe that hiring young brokers gives franchises a bigger advantage in not only attracting Gen Y clients, but also dealing with them.

“I believe being a Gen Y is my most competitive advantage,” says Ms Patterson. 

Mr Cunliffe is another broker flying the flag for Gen Y, having been named Queensland’s Broker of the Year at the state’s Better Business Awards in March, and finishing third in The Adviser’s 2013 Young Broker of the Year award.

“I think I connect well with them by default because they’re my peers – I’m from the same generation,” he says.

However, older heads agree that it’s not necessary to specifically hire young brokers to target Gen Y.

Oxygen Home Loans general manager Alan Hemmings believes age is just a number. “If you’re a specialist and you’re an expert in your field, and you can communicate clearly with clients and build that relationship, I don’t think it matters what age you are,” he says. “It’s about building that trust, and that’s the most important thing.”

Karen Forbes, Smartline’s broker for North Manly and Sydney’s CBD, believes Gen Y clients are looking for experience.

“They really want someone who can guide them like a parent, and that’s why I think having the experience is working. I would not promote specifically having a younger broker to appeal to younger clients – not in my demographic,” she explains.

The boomer-parent link

As many Gen Ys still rely on their parents financially, with some still living under the same roof with them, brokers recognise the opportunity to engage the children of their Gen X and baby boomer clients.

Mr Salt reckons that when it comes to financial matters, most Gen Ys seek advice from their friends or the internet – but they also ask their mum and dad. “It’s the one area where Gen Y are quite happy to defer to their parent’s greater authority,” he says.

Both Ms Patterson and Mr Cunliffe agree that a great way to build a relationship with Gen Y is through their parents, and have seen a noticeable increase in their client base from using this strategy.

“Many of my existing clients ask me to meet with their children often a year or so before they intend to buy. It is great to be helping a second generation of clients, and they and their friends are an excellent source of qualified new clients,” Patterson explains.

“More often than not, we are referred to by the parents of younger clients,” Mr Cunliffe adds. “There are more and more kids of clients coming through the door.”

Phil Rogers, Loan Market’s mortgage broker for Townsville, is seeing an opposite trend in today’s market.

“We are actually now finding ourselves being introduced to their parents instead of the other way around,” he says.

But Ms Forbes says she won’t sit back and expect that her clients’ children will come to her just because their parents do.

"I had an instance recently where I dealt with a client who had a son in his 20s. He told me that his son had just gone out and bought an investment property with no indication of where he went for his finance dealings. This made me wonder whether he’s part of a generation that prefer to find their own way and don’t necessarily do what their parents do,” she says.

Mind your message

There are many other ways to attract and connect with Gen Ys that may seem obvious to brokers, but are just as important.

Simple things such as being relevant, understanding how they think and treating them with respect will go a long way towards winning their affection. You’ve got to be on the same playing field and be willing to educate them, rather than trying to be superior. Don’t come across as the old man or the mother trying to mollycoddle young buyers.

“Facilitate their lifestyle rather than control their lifestyle – show them how they can do something rather than giving them a lecture on how they shouldn’t do it,” Mr Salt explains.

It is vital for brokers to demonstrate their value to Gen Ys by not only knowing their product, but also offering unique options and flexibility.

“I think more non-conventional strategies appeal to younger clients, including things like offset accounts, credit card sweeps, split loans, and accelerated debt repayment strategies that allow them to repay the debt as quickly as possible, but also give them flexibility and the feeling that they are in control,” says Mr Rogers.

Brokers also need to keep in mind that Gen Ys may think outside the box about their home loan and how they can get it, according to Adam Ferrier, chief strategy officer at advertising firm Cummins & Partners in Melbourne.

“Can you easily offer a crowd-sourced home loan? Or at least a home loan they can split with their friends?” he says.

Given that Gen Y is an immediacy generation, you need to set them clear goals and give them a specific timeframe for when they can be achieved.

“When they come in and they want something now, and they can’t get it, the most important thing is to tell them when they can,” Ms Forbes explains. “Some brokers won’t even talk to people until they are ready to buy property.”

“You need to provide quality, tailored advice and be able to deliver it in a timely fashion so they don’t go looking for answers elsewhere,” says Ms Patterson.

Mr Spencer emphasises how tough it is to attract Millennials because of their unreasonably lofty expectations of customer experience, and says brokers should not specifically aim to attract Gen Ys, as they are just like any of the other generations searching for a response to their needs.

“It’s a misnomer that they are the next big thing when it comes to customers,” he says.

“This demographic only accounts for approximately 15 to 20 per cent of the current working adult population, and 95 per cent of them fall under the ‘first home buyer’ category. What about the remaining 80 to 85 per cent of property owners and mortgage seekers who are already in the market, have some knowledge about the market and have some experience in the market?”

“If a mortgage broker wants to limit their scope of services to the newer generations then they are missing the greater opportunities in the market space.”