The whole premise of the talk was this – Generation Y are more and more abandoning the idea of home ownership and spending the money they would otherwise be saving towards buying a house on stuff. Apparently the stats are there – applications for credit cards, store cards, short term loans etc have gone up, and applications to lending institutes to purchase property have gone down according to Veda.
Why is this the case?
With LVR restrictions in place and low-deposit loans harder to achieve, I can see why. Tell someone they need to have 20% of $450,000 to buy somewhere near the average in Christchurch, and $90,000 seems like a fantastical figure to strive for.
We very much live in a “must have” society. Generation Y feels the claws of consumerism more than any other generation preceding it. Talk to anyone between the ages of 15-25 – how many of them have the latest cellphone/tablet/gizmo/gadget/app/whiz-bang thingy? A good portion of them I’d say. How many 18-“20 somethings” think nothing of whacking the expensive dinner/trip to Auckland for the concert/newest pair of sunnies on the credit card “and I’ll sort it out later”?
This debate isn’t about consumerism though. It’s a cause which leads to the effect of my point.
Hosking put it quite succinctly – home ownership has NEVER been cheap. Not many people I know have said “meh… got a big wadge of money here… might buy a house or two.” My parents scrimped, saved, clawed, and worked their proverbials off to buy their first home. It was a 90-odd m² box of a house in Redwood on a sizeable section that was on a Christ College lease. So not only did they sweat blood to buy the house, they also then put it all on the line again to buy out the lease. Your parents probably went through similar processes.
Yes, I’ll concede the gap between earnings and home values was narrower, but remember, interest rates back in the good old days of “Rogernomics” under Lange’s Labour government were the thick end of 22%. Put that in perspective – today the average home loan in Christchurch is around $230,000. The current market floating rate is 6.85% so payments on this are $1507 per month over a 30yr term. At 22% – $4223 per month. Wow.
I see young people on a regular occasion wanting to get on the property ladder. Some I can help – some are dreaming. I sit down with the dreamers and go through their in-comings and out-goings. While I’m sitting in their houses, sipping coffee they have made me from the latest coffee machine on the market, while they go over their expenses on the latest tablet on the market, and the latest and greatest in flat-screen audio-visual whiz-bangery is sitting in the lounge (which is usually very tastefully furnished with brand new furniture by the way), how much evidence do you think I see that makes me believe these guys are willing to sacrifice their credit-fuelled lifestyles to achieve their goals? Nothing. Not a jot.
Also, since when did someone’s FIRST home have to be the 4brm, 10-20yrs old, internal-entry double garage, on an 800m² section in Cashmere/Kandallah/Remuera?? Please please please younger buyers… keep your goals realistic. Start with the 3brm, maybe garage/maybe not, needs a little work done to it, style property and work your way up. Like every generation before you.
I do believe the attitude to home-ownership amongst the “youngers” is changing – I see it often. I don’t believe however that what your average person has to do to get into their first home has changed much at all. If you want something bad enough, you will sacrifice certain facets of your life to get there, just like my parents and probably yours too, did. There are other ways to “skin the lender” as well – I know a few and am happy to discuss ideas. But if you are serious about saving that deposit, maybe the 2yr old tablet you already have can last you just a little bit longer.
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