2008 Spring

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Housing affordability is not only a strain on wannabe home owners but renters too. The increased demand for well positioned housing has pushed Sydney’s rents sky high. The June figures recorded by Australian Property Monitors show the median weekly asking rent in Sydney as $400 for units and $420 for houses, almost a 200 per cent increase from the start of the decade. RP Data break down the discouraging median weekly rent figures further:Marrickville rents rose around 16 per cent, while other popular suburbs like Leichhardt and Woollahra saw rent increases of 22.9 percent and 28.3 percent respectively. A home that was leased for $525 per week in North Sydney a decade ago can now be leased for $680. Using the law of supply and demand, it is forecasted that the next figures will be bleaker still as Sydney’s population grows by what the RINSW estimate as 1400 a week. Adding to the pressures is the significant decline in the number of new building approvals and construction recorded over the last few years and the significant decline in investment. A look into the property market over the last 20 years shows a correlation between the social changes that have occurred in Australia and the increasing generation gap between Xs and Ys. Low home ownership figures can also partly be explained by looking at what each generation considers important. While previous generations placed greater importance on saving, marriage, starting a family and home ownership, the report found that one-fifth of 25-29 year olds are still living with their parents, many hold off starting a family well in their 30s and 59 per cent are renting. The report also shows that because of the higher levels of university admittance, Gen Y begin adulthood already in debt from Higher Education Contribution Scheme (HECS) responsibilities. This debt, coupled with the increased adoption of credit cards as a part of their financial management, means this generation currently owes a hefty $60 billion in total. With a lot of young people trapped in a cycle of long-term renting, many cannot afford to save an adequate amount for a deposit on an investment or their own home. A recent AMP.NATSEM Income and Wealth Report highlights the difference between the saving and spending behaviour of Generation Y with the behaviour of Generation X when they were the same age in 1989. The report shows that although 41 per cent of Gen Y are saving for a deposit on a property, only 25 per cent have saved more than $10,000 so far, which can partly explain why home ownership figures are down 9.1 per cent from 1989. The generational gap in home ownership figures can also be explained through a look at housing affordability. According to the HIA, housing affordability is at a record low in Sydney and with the cost of borrowing set to improve in 2009; median house prices are expected to continue to rise, further shutting out first home buyers, while increasing the prosperity of home owners. The BIS Shrapnel’s Residential Property Prospects, <strong>2008</strong> to 2011 report agrees; improved lending rates will only increase house prices and in Sydney, these prices are expected to increase by 18 per cent in the next three years. Page 8
With these escalating house prices, it is no wonder that the proportion of Australian households owning their homes outright has fallen from 42 per cent in 1995 to 34 per cent as of the last census. Auction clearance rates for the beginning of July also reflect the current affordability crisis. Sydney’s auction rate stood at around 49 per cent, this is well under last year’s recorded rate of 59 per cent. Of course affordable Sydney housing does exist, but it is found predominantly on the outskirts of the suburbs, far from work or in areas considered unattractive because of their detachment from friends and family; trendy eateries, bars; gyms, nightspots and other social environments. It seems Australia’s young adults are unwilling to sacrifice their lifestyles for home ownership, creating a shift in social values and making city living the new young Australian dream. With labels like ‘sponges’, ‘spoilt’, selfish and ‘KIPPERS’ (Kids in Parents Pockets Eroding Retirement Savings) being thrown around households and in the media, it is clear that Generation Y do not have a sound reputation, but what is ignored are the factors that led to this pigeonholing. Ask this generation what they want for themselves and for their futures and most will agree that one day, and most probably when they are in their 30s, they do want to be investors and home owners. But, it will only happen under the right economic and social circumstances. Many are discouraged from the housing market because of the unmanageable costs of a mortgage. According the ABS: “the difference in costs between younger and older owners with a mortgage is largely a reflection on the difference in house prices, and hence the amount borrowed, at the time Page 9 of purchase. On average, recent home buyers paid higher prices than those who bought their homes ten or more years ago”. Generation Y will, more than likely, end up doing exactly as their parents did, the main differences being they will do it in their 30s instead of 20s and their homes and families will be on a smaller scale. The demise in building approvals, investment and construction; hefty interest rates, the shift towards further education, which delays entry into the workforce as well as directly impacts on savings, and of course, the shortage in the supply of affordable and well positioned homes for rent and for sale can all partly explain why many of Australia’s young adults have not achieved as much as their parents did by adulthood. It is often said that ‘Baby Boomers,’ those born after World War Two and up to the early 60s and ‘Generation X,’ those born between the early 60s and the early 80s, endured hardships and sacrifices to ensure their ‘Generation Y’ offspring were better educated and more ‘comfortable’ in every sense of the word. Although intentions were virtuous, the research into current trends shows previous generations may actually have disadvantaged young Australians from entering the housing market through their property investments and own wealth generation. According to Steve Martin, president of REINSW, many property investors took advantage of last years market opportunities by selling their rental properties and cashing in on their superannuation. These properties were predominantly sold to owner-occupier households, and this impacted directly on vacancy rates rent prices in NSW and severely disadvantaged many young Australians. And with rent prices so high, it is no wonder many Gen Ys are staying home for longer. And for those that do fly the nest, many are unable to accrue any real savings, let alone a deposit for a home.
Page 1 and 2: PROPERTY REVIEW A Quarterly Journal
Page 3 and 4: C o n t e n t s Rent hikes explaine
Page 5 and 6: A mortgage is often the biggest fin
Page 7 and 8: The preliminary estimated resident
Page 9: G e n e r a t i o n Matilda Haddad,
Page 13 and 14: Lower North Shore Median House Pric
Page 15 and 16: 2 Dind Street Milsons Point C u r r
Page 17 and 18: 2 Dind St, Milsons Point C u r r e
Page 19 and 20: O u r O f f i c e s Head Office 38

2008 Spring

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