Struggling to break into the property market? Don't worry about it.
Former tax accountant and financial adviser Clayton Daniel has some advice for you: shun housing and invest in your superannuation.
Hearing the word superannuation might make you want to fall asleep but Mr Daniel, who is now the author of personal finance guide, Fund Your Ideal Lifestyle, said you can make similar returns from investing your money into your tax-effective superannuation account than you can from investing in real estate - and it might be a safer option.
"Before I got into finance I used to think property was the best investment because all you had to do was buy it and hold it. It seemed very simple and hard to get wrong. You also have a very strong emotional connection to it because you can live in it or drive by it - it's not hidden behind what I call 'layers of incorporation'. You are not distant from your investment and for that, property is fantastic," Mr Daniel told news.com.au.
"But what I started to notice years ago as a tax accountant and financial planner was that people were losing money on purpose and calling it negative gearing - as if the concept of purposefully losing money every year was a smart investment strategy in the hope that over the next decade the investment would go up in value enough."
The suggestion that property won't appreciate over time may be ludicrous for most millennials, or most people, and they would be right to a degree. Bricks and mortar is traditionally a very safe investment that does go up in value. Over the past 10 years, house prices across Australia's combined capital cities have gone up 5.8 per cent.
But nothing, including the property market, is perfect.
"For many people, investing in property has worked but that's all you hear. You only hear the success stories. For many other people that have done the exact same thing, it hasn't worked," Mr Daniel said.
"I had many clients that came to me after they had invested in property and it hasn't worked out for them. That situation is not going to be news for anyone that has worked in personal finance."
So property can sometimes go bad. But the issue for the current generation of homebuyers is that it is becoming less likely for property to pay off.
"In Sydney, the property market has done remarkably well for decades, but now house prices are 12.2 times the average annual household income, I'm willing to say that even if it does go up in value, the mathematics required for rises to exponentially continue at this point would also require extreme, unimaginable, impossible affordability," Mr Daniel said.
He said the housing boom - fuelled by record levels of foreign investment - has artificially inflated house prices, to the point that property is not such a great investment anymore.
"First home buyers' competitors are international buyers who are more keen to get their money into Australia than they are to find an investment that is fair value. Artificially inflated is probably the best term for it."
According to the latest report released by the Foreign Investment Review Board (FIRB), overseas buyers invested $60.75 billion into Australian residential real estate in 2014-15.
That's 75 per cent more than approved investment in 2013-14 and 254 per cent more than 2012-13.
"China was the largest investor, with three times more than the closest competitor, which was America," Mr Daniels said.
"And Chinese nationals are very keen to get their money into Australia for a number of reasons, so they have motivation beyond simply buying a property as an investment and hoping it goes up in value."
INVEST YOUR 'MORTGAGE' INTO SUPER
But throwing your hands up in defeat and worrying you'll never secure your financial future is not the answer.
If you invested the difference between the rent you pay and what your potential mortgage repayments and ownership costs might be, assuming it is no less than an extra $100 a week, Mr Daniel said you could have squirrelled away around 80 per cent of the returns of buying and selling a home in ten years.
Mr Daniel's calculations are firstly based on the assumption that property prices will double every decade. He has then calculated the savings you can make by renting over owning - such as saving on council rates, strata fees, insurance, repairs and maintenance, and capital gains tax - plus the tax benefits of using salary sacrifice and the earnings on all those additional super contributions.
"I like to say 80 per cent of the return, but that is based on interest rates as they are today. Of course, if interest rates were to go up and it cost more to own property, you could possibly make 120 per cent. But 80 per cent is my rule of thumb.
"But these calculations come from years of doing tax returns on property."
ADVANTAGES OF SUPER
Admittedly, Mr Daniel said superannuation sounds like a terribly boring and bureaucratic word, but he also said it is important for millennials to understand how beneficial taking advantage of it can be.
"As an ex-tax accountant I was always asked how to save more and pay less money on tax, and this is the best way," he told news.com.au.
Investing in your super is an extremely tax-effective and lucrative form of forced savings, essentially.
"It saves you tax today, it saves you tax at the end of the year and it saves you tax later in life," Mr Daniel explained.
It saves you tax today through salary sacrificing. Salary sacrificing is when a part of your pre-tax pay cheque goes into your superannuation.
"So where negative gearing is the practice of losing money each month and then getting a tax deduction for losing money, salary sacrificing is the practice of keeping money and paying less tax. It is a far better way to reduce your tax today," Mr Daniel told news.com.au.
"You pay less tax every year because every year you have earnings and gains on your superannuation investment portfolio which is only taxed at 15 per cent rather than 40 per cent.
"And finally, you pay less tax later in life because there is a very simple function inside of super that converts everything inside it to 100 per cent tax free when you retire. If you bought an investment property today and sold it in 20 years time, you would have to pay capital gains tax."
Don't go too crazy though. There are limitations on how much you can invest into your super. The concessional contribution cap, which is the money you salary sacrificed into your super, for those under 50-years-old is currently $30,000 per year. This cap includes the mandatory amount you receive from your employer already.
But Mr Daniel assures that even with the cap, you can still get ahead.
"If you start in your 20s and 30s, you are going to have such a long runway you will be able to stay under those caps so that it gradually grows," he explained.
But putting all calculations aside and ending on a more relatable note, Mr Daniel said shunning the property market and investing in your superannuation is also "ten million times easier" and gives you more freedom without being tied down to a property and a mortgage.
"All you need to do is talk to your employer once and ask them to take out $100 a week from your salary and put it into your super. It is so much easier than owning and managing a property."