As if affordability wasn’t enough of a barrier, the fact that Baby Boomers and Generation X’s are opting to stay put in their homes rather than sell, is making it harder for younger Australians – the Gen Y’s – to get into the housing market.
A recent study by the Commonwealth Bank found that only 44% of Australian households have moved in the past five years compared with 73% a decade ago.
Craig James, the study’s author, says the results reflected the ageing population, rising moving costs and an increase in the number of people happier with where they lived.
“Once people have found their dream home they will stay there, but it’s interesting over the past decade, even among the home owners, there has been less propensity to move,” James says.
“That may be good for the Baby Boomers and Generation X, but if they don’t want to move, and state and territory governments don’t increase housing supply, then it really puts big pressure on Generation Y to find their homes, and at a reasonable cost.”
The data also showed only 15% of home owners without a mortgage had sold their primary residence, while in 1999 the number was closer to 60%. Also, 42% of mortgagees changed their address in the last five years, a 25% drop.
“If you get people who decide to stay in their place for longer, it makes it very, very hard for renters and people wanting to buy to shift out of their accommodation and find the place that they want,” says James.
Add to this rising rentals (making it harder to save for a deposit) and rising interest rates (making it harder to service a loan) and it looks like many Gen Y’s will remain tenants.
Over the years the rate of home ownership in Australia has remained much the same – around 70%, but putting all these factors together suggests that in the future more and more people will remain tenants.
Of course, there is nothing unusual about this – just look overseas – as cities mature they become more unaffordable. Even though fewer people can afford to buy properties, this doesn’t stop property values increasing. Those in the market end up having more equity in their properties and they can afford to upgrade – it just gets harder for the new generation of home owners.
Will all this stop property values from increasing?
No. Property values will keep rising but significantly more in some suburbs than others. As the report stated: “As home owners and investors (and tenants for that matter) head for the inner and middle suburbs, areas where the land is already built out, yet which offer proximity to workplaces, schools, public transport, shopping and entertainment facilities rents and property values will keep increasing.”
Of course, there are always affordable properties in the outer suburbs and in regional Australia, but that’s not where most Gen Y’s want to live.
As a property investor, we want our properties to outperform the market averages, so it will be important to know the type of property that will be in continuous strong demand by tenants in the future.
So here’s my recommendation… with the Gen Y in mind purchase one or two bedroom apartments in the inner and middle ring suburbs of our major capital cities, close to amenities, transport and lifestyle facilities.
Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. For more information about Michael visit www.metropole.com.au and www.PropertyUpdate.com.au.
Look out for the newly updated 3rd edition of his best selling book How to Grow a Multi-Million Dollar Property Portfolio – in your spare time.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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