By some accounts Generation Y is getting squished out of the property market, not only for buying but renting too. In fact, any Gen Yer with aspirations to a home must have shoved their iPod earphones in deep to drown out the Residential Development Council’s provocative survey showing only 7% of property experts think those born between 1978 and 2000 will ever be able to buy their own house.
With the current housing affordability “crisis”, we’re fast getting an understanding of how an increasingly large group living longer – and holding onto property – might affect the generations underneath. As Ryan Heath put it to Baby Boomers, Please just f-ck off … it’s our turn now.
Perhaps there’d be less enmity if the government threw Gen Y a bone, in the spirit of intergenerational bonding. And why not start with wiping out HECS (Commonwealth Supported Places) debts so there’s at least a hope of parity among potential buyers? At June 2006, there was $12.5 billion of accumulated HELP (formerly HECS) debt in Australia.
Or how about not charging so much for education in the first place? Although, of course, students have been saved the financial pain of $500-600 student union fees each year, course fees have dramatically increased since the Howard government came into power.
It can now cost around $50,000 for a Commonwealth-supported undergraduate degree in law or medicine, or $35,000 for an engineering degree. For a domestic full-fee paying student it can be more like $20,000 a year; in other words, a tidy deposit on a house/apartment/hovel.
It isn’t all bad news. In some ways, Gen Y will be better off than their olds. There are lots of Baby Boomers with housing but no money, says James Kirby, editor of the Eureka Report; the existence of reverse mortgages being the most obvious proof of this. And they need it – the 2004 median superannuation balance was $30,700 for men and $8,000 for women.
Generation Y on the other hand, will have super but no housing to fall back on. Until of course, as Joshua Gans writes, they inherit it, their best option at this stage while the so-called average house can’t be bought with an average income.
But perhaps we’re clouding the real issue by talking in generational terms.
There are over 300,000 DIY super funds in Australia, says Kirby, with an average $670,000 worth of assets (this amount has leapt $90,000 in one year). The government’s tax changes, which mean that assets inside funds won’t be taxed, are a necessary reaction to the burden of ageing Baby Boomers.
Problem is, this will encourage already cashed up Baby Boomers to snaffle investment properties (in some cases more than one). They will then have every incentive to keep them inside the super fund, and very little to sell.
Forget expanding further into the suburbs; unlocking this property could be a better way to go.