Posts Tagged‘loans’

Maybe I’m Answering the Wrong Questions About Gen Y’s and Property.

I’ve long been of the opinion that many of my fellow Generation Ys are suffering from a crisis of desire in regards to the Australian property market. It’s an understandable phenomenon as most of us grew up in what are now quite nice suburbs, central to a lot of services and now considered to be an extremely desirable place to live. It then comes as no surprise that our generation would want to replicate this with their first home purchase and regrettably this leads many to believe that the property market is unaffordable, which at that level it most certainly is. Buying out in the mortgage belt, like most of their parents did back when the time came for them to do so, has been my solution to the issue for quite some time now but some recent reading has pointed me towards http://fhareversemortgagecalculator.com/ which in turn pointed me in another direction, one that I hadn’t considered previously.

To give you some background on where this thought came from I’ll point you in the direction of a really solid article from The Atlantic on the drastic change in spending habits between Gen Y’s and their predecessors. In it Thompson lays out the idea that perhaps Generation Y has replaced the home and car as the most desirable objects with modern technology like smart phones. This is coupled with an increasing tendency towards sharing those same goods (called collaborative consumption) that have such a high capital cost which means total ownership plummets whilst use sky rockets. It’s an interesting idea and I was wondering if the trend translated across to Australia.

Turns out part of it does.

Whilst I couldn’t find any good information around car ownership with Australia being a country that’s heavily focused on property ownership there was a lot to dig through in regards to Gen Ys attitude towards property. Shockingly, at least for me, the vast majority of Generation Ys do intend to buy, somewhere on the order of 77% which is actually above previously generations. Faced with the decision of not being able to get the home they own many will consider a cheaper investment property initially in order to be able to leverage it later into the property they actually want. That’s not the interesting part though, what I found out is that 72% of Australian Gen Ys would buy a house with a friend or family member. Whilst I’ve known people who’ve done this I had no idea that it would be so common and that’s an intriguing insight.

I’ve long held the position that the median house price on a single income is unaffordable in Australia and it appears that Gen Y is aware of that, at least on some level. Collaborative consumption of the housing resource then is our way of reacting to this, in effect shrinking the affordability gap by spreading the pain around a bit. Indeed I did something very similar to this when we bought our first house in Canberra by renting out two of the rooms to friends for the first year. The experiences from others are similar as well with the sharing arrangement usually only being temporary (on the order of years, not decades) before they’re able to part ways into a home of their own.

This means my hammering away at the point that Gen Y is suffering under a crisis of desire (they still are, at least in my opinion) probably isn’t going to help them change their minds. What I should probably be focusing on instead is the ways in which to structure these kinds of sharing arrangements in order to make the desired property more affordable or what strategies they can use in order to get themselves into a position to make it affordable. As you can probably tell I’m still wrestling with the best way to approach this and the ultimate idea will have to be a post for another day.