Surge in Millennials struggling to leave home amid ongoing affordability crisis
The ongoing affordability crisis is entrenching a generation dependent on parents for housing, with the number/proportion of Millennials giving up hope of moving out of home by 30 years of age surging.
The 2019 Perceptions of Housing Affordability, conducted by YouGov/Galaxy Research on behalf CoreLogic, found the proportion of Australians who think they will be at least 30 years of age before leaving home has jumped from 20% in 2017 to 34%.
Lisa Claes, CEO CoreLogic International said, “The report shows the ‘cubby house’ syndrome – where children stay home longer with parents - is alive and well. Our youngest generation is effectively being locked out of the market and increasingly dependent on parents.”
“If Millennials continue to lose hope, we risk entrenching a generation who become disenfranchised from society. It raises serious issues around intergenerational equity and should be a catalyst for policy makers to address affordability.”
The report identifies and highlights a number of key trends:
- Millennials keep home ownership dream alive
- Australians finding it hard to secure a loan
- ‘Cubby House Syndrome’ worsens
- Housing costs remain high
- Australians want stamp duty addressed
- Foreign buyer concerns ease
There are several reasons why Australia is
still facing a serious affordability crisis.
Affordability ratios remain elevated
Firstly, the income to dwelling value ratio today is 6.5 times. So, the typical Australian household is spending, on average, 6.5 times their gross annual income to buy a median-priced dwelling of $524,000. Less than 20 years ago it was 4.5 times. The market is hard to get into. It takes 8.7 years to save for a 20% deposit. That’s a long time; an eighth to tenth of a life.
Prices may be in an upswing again
While affordability improved with price falls, those gains may be unwound with house prices now appearing to have stabilised and possibly entering a new growth phase in response to lower interest rates. A recovery in housing values accelerated in August 2019 with national dwelling values increasing by 0.8% over the month.
Australians are struggling to get a loan
Our report found that 45% of Australians say getting loan approval is a major obstacle to affording a home. It is now the second-biggest obstacle; in 2017 Australians saw it as the 6th most important concern. The rising concern comes amid a significant tightening of credit following the implementation of strong prudential regulations. Lenders are also making it harder to get loans with a bigger focus on borrower expenses.
Low income householders struggle to save a deposit
And 31% of households with an income of less than $50,000 say they wouldn’t be able to raise more than a 5% deposit, and 41% wouldn’t be able to raise a deposit of more than 10%.
Housing costs are huge
Australians are spending 35% of gross annual income to service their mortgage. That is a serious amount of disposable income they need to be able to service their loan.
Wage growth is anaemic
But while house prices remain elevated, incomes have not been rising to match. Wages grew just 0.6% in the June quarter. ^
^ Wages rise 0.6% in the June quarter 2019, Australian Bureau of Statistics, published August 14, 2019. https://www.abs.gov.au/ausstats/[email protected]/Latestproducts/6345.0Media%20Release1Jun%202019?opendocument&tabname=Summary&prodno=6345.0&issue=Jun%202019&num=&view=