We see it constantly in the headlines, young people are being repeatedly priced out of the housing marketing and it is getting worse every year. The Australian Bureau of Statistics revealed through data that home ownership among those who are ripe for purchasing their first home between the ages of 20 to 39 has been on the decline according to the 2016 census.
This figure is now down to 36 per cent of people between the ages of 25-29 owning their own either outright or with a mortgage, the lowest level since the 1960s. This is not just exclusive to young millennials with those aged 35 to 39 experiencing a drop to 58 per cent, down 3 points since the previous census in 2011.
This result is skewed towards the younger generations with those in older age groups actually gaining a larger share of home ownership during the period between the 2011 and 2016 census. What does this reveal about the current state of our housing market? Is it all doom and gloom?
This article by the New Daily indicated that it is likely a result of increasing income inequality according to Dr Judith Yates, one of Australia’s leading housing economists. While there is more to the story such as declining rates of marriage and fertility amongst the younger generations, things like rising prices and increase tax concessions for investors as well as scarcity of land close to the city due to increasing population growth have all played their part in this changing demographic.
However, there is another element that Dr Yates may not have considered. While it is becoming tougher to purchase a home in 2017 Australia, young people are not simply sitting back and accepting their fate as perpetual tenants, far from it. They are becoming savvier in the way they use their finances and have taking advantage of those very tax incentives that others say is holding them back from owning their own home.
According to a recent report by Herron Todd White, 13% of first home buyers nationally are now opting out of buying an owner occupied home and instead purchasing investment properties while either renting or living in the family home. This figure is even more significant in cities where housing prices are making news headlines with 24 per cent in New South Wales and 20 per cent in Victoria.
This allows many young people the flexibility to live closer to where they work and spend leisure time as well as take advantage of record low yields, with many of these properties being much more cost effective to rent rather than purchase. All the while their investments are generating healthy returns in areas that are identified as prime for returns on their capital.
While young people may not be purchasing their own home, they are making a statement that they will not be defeated in a changing property market which favours investors rather than owner occupiers. This figure is something to keep an eye on as prices continue to rise, pricing many owner occupiers out of the market, particular those under 30. As our property market changes, the results will be revealed of how this new strategy is starting to shape the next generation of property owners amidst this new economic landscape.