Have you ever had the discussion about which generation has had it easier in the property market? Baby Boomers, Gen X, Gen Y?
I know it sparks instant comments from my dad ( a baby boomer ) about the 18% PA interest rates he faced when he bought his first “family” home for us back in the early- mid 70’s.
So what do our Gen Y’s face in today’s market?
This article from the Brisbane times had some interesting stats and points, but in a nut shell, it looks like, "What may have worked for the parents of today's first home buyers may not apply to their children looking to follow in their parents' footsteps."
Read the article here or on the link below:
Brisbane's 35-year, 1645 per cent property boom
August 22, 2013 Marissa Calligeros - brisbanetimes.com.au reporter
Which generation has had it easier in the property market?
The Baby Boomers, who have generated about a third of house price growth over the past 40 years?
Or Generation Y, which has the bonus of first home buyer grants and flexible house and land packages?
How property affordability in Brisbane has changed in the past 35 years.
In 1978, when a Baby Boomer aged 60 would have been 25, the median house price in Brisbane was $29,500. Since then, the median house price has increased to $515,000.
LandMark White Research has compiled raw figures comparing the property market in 1978 to the market in 2012. ·
- In 1978, the average annual wage was $10,869. ·
- In 2012, the average annual wage was $69,992. ·
- In 1978, the Baby Boomer couples were putting 22 per cent of their (usually just one) wage towards a mortgage. ·
- In 2012, Generation Y couples were parting with 56 per cent of their (usually two) incomes to service a mortgage.
As a general rule of thumb, banks will not loan to potential home buyers if more than 35 per cent of their wage will be swallowed by mortgage repayments, therefore pricing many Gen Ys out of the market.
That's based on the raw figures alone.
The property market has undoubtedly changed in the past 35 years.
Supply was not an issue in the 1970s. Now, delays due to land rezoning and project approvals are limiting land supply and keeping the flow of new housing stock low.
Migration patterns have changed, as has where and how the population wants to live.
The differences are numerous and varied; lending patterns and criteria, borrowing capacities, inflation rates, the cost of living, and government incentives have changed.
"The point of all of this is that the real estate landscape is dramatically different for today's first home buyer as it was for the baby boomer generation seeking entry into the property market during the 1970s," Ben Crossan of LandMark White said.
"What may have worked for the parents of today's first home buyers may not apply to their children looking to follow in their parents' footsteps."
Real Estate Institute of Queensland chief executive Anton Kardash said the challenge of homeownership was just as difficult for both generations, but for different reasons.
"The challenge was as difficult, the hurdle was as great, as it is today," he said."But the pressures that we faced back then are different to the ones people face today.
"Our middle class has grown quite significantly, so there's a lot more support for young people going forward that may not have been around 35 years ago.
"Having said that, the market is a more expensive place to be in."
Property analyst Michael Matusik said the comparison could not be made without looking at cost factors outside the property realm.
"Today, people generally rely on two incomes to service a loan. Back in 1978, only full-time male earnings were considered.
"Also, you needed a 30 per cent deposit back in 1978. Today some banks are back to asking for just 5 per cent. "
And contrary to popular belief, transport costs then were higher than today. Public transport was more expensive and cars were less fuel-efficient."
However, Mr Matusik said property "affordability isn't that much different". "In fact, half the sales in the Brisbane Local Government Area are affordable to today's typical first home buyer in Brisbane, assuming they have a deposit, good financial track record, live in a stable couple relationship and earn the average wage," he said.
Hence, those outside that demographic today would have therefore also found themselves priced out of the market in 1978, he said.
For further home loan information, call us today, we don't mind where you fit in the generation alphabet!