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No room for new home owners

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 longer rather than sell, is making it harder for younger Australians – the Gen Y’s – to get into the housing market.

Firstly the property markets have moved into a buyers’ market which means fewer vendors are selling their properties.

Then there is a tendency to stay put longer, which reflects our ageing population, rising moving costs and an increase in the number of people happier with where they lived.

A Commonwealth Bank Study last year 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,” said Craig James, chief Economist of theCommonwealth.

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.



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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