Rising house prices have seen increasing numbers of young people buying investment properties but this tactic may be riskier than they realise.

The latest figures from the Australian Bureau of Statistics’ Survey of Income and Housing 2017/18 show rates of home ownership continue to decline.

According to the survey, 71.4 per cent of households owned a home in 1994/95 but this dropped to 66 per cent in 2017/18. It is also 2 per cent less than in 2015/16 when 68 per cent owned a home.

In particular, declining housing affordability is impacting young people’s rates of home ownership.

Four years ago, 12.8 per cent of the 15 to 24-year-olds surveyed owned a property. This has dropped to 9.6 per cent.

Home ownership among 25 to 34-year-olds has also dropped, from 38.6 per cent to 36.8 per cent.

Younger people now seem to be looking to investment properties as a way of getting on to the property ladder.

About 18.4 per cent of 25 to 34-year-olds now own an investment property, holiday home or other property they don’t live in. This has increased from 12.5 per cent since 2013/14.

According to the survey, there are 1.8 million households who own an investment property, holiday home or other property they don’t live in.

But Grattan Institute housing expert Brendan Coates said the trend for “rentvesting” mostly helps wealthier young Australians.

Statistics have previously shown that among those aged 25 to 34 years old, about 8 per cent were rentvesters but if you looked at the wealthiest fifth of this group, rentvesting jumped to 13 per cent, Mr Coates told news.com.au.

“Rentvesting is helping young wealthier people using it to access the property market but it’s not going to help those groups struggling to access the market today because of housing affordability,” he said.

In fact, the biggest drop in property ownership has been among the poorest 40 per cent of each age group because they struggle more with things like saving for a deposit when house prices are rising faster than incomes.

While rentvesting can seem like an appealing option, Mr Coates said those using it to get into the market also needed to be careful not to take on too much risk.

“There is a real question whether rentvesting makes sense for those getting into the market, as it depends on price rises,” he said.

The benefit of rentvesting is that if prices rise, the value of the investment property also rises so owners are not left behind.

“But in a world where rental yields are still very low, investors should be careful about getting the return they want,” Mr Coates said.

He said saving money through superannuation or another investment vehicle may be a better option.

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Meanwhile, ownership of investment properties among older Australians has also increased but Mr Coates said this was likely due to them inheriting property and not necessarily them buying an investment home.

“The average age for getting an inheritance is about 60 years old,” he said.

This is when many people would inherit a property and it could then become an investment property.

Mr Coates said buying an investment property didn’t make as much sense for older Australians because most didn’t pay income tax and so couldn’t take advantage of negative gearing policies.

“Only one in six of Australians over the age of 60 years old pay income tax,” he said.

Mr Coates said home ownership had historically been a core part of how Australians lived and saved for their retirements and if this changed, this would create challenges around how Australia funded people’s retirements.

Mr Coates said many policies in Australia relied on people owning their own homes.

“The family home is largely exempt from the aged pension means test and is also exempt from capital gains tax,” he said. “So in a world where home ownership isn’t the norm, there are some other adjustments needed to support housing in Australia.

“We as a community have a choice. We can either support affordable housing so that young people can get a home or we can prepare for a different type of future where home ownership cannot be taken for granted.

“The place where that is going to play out the most is in retirement as the system is based on Australians owning their own home. If that changes there will be big challenges for how Australia funds retirements.”

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Young people are increasingly buying investment properties.