Gen Y - still living at home and loving it!

Posted on 7/08/2008  

More than half the people we old people call "Gen Y" (those born between 1976 and 1991), are continuing to live at home. Predictably, the Housing Industry Association, which proclaimed it so last month, blamed the "still living with the olds" syndrome on Australia's unaffordable housing market.

The HIA used data from a 2006 ABS Survey of Income and Housing and the 2007 NATSEM-AMP study to put some meat on the bare bones of anecdotal stories. For illustrative purposes only, let's consider the lifestyle of 29-year-old Ben (and girlfriend Stacey), comfortably ensconced in the self-contained granny flat below Ben's Mum and Dad's McMansion in the suburbs. Ben and Stacey are both pulling in $80,000 to $100,000 a year and work long hours (so they eat out almost every night). They are yet to break away from the family nest to put a deposit on their own place.

Perhaps it's their need to each have a car, a mobile phone, a laptop and gym membership which eats into their disposable income? And why on earth would they save up for some besser-block starter home in the outer suburbs when they can have the wide screen TV and whitegoods heaven that is Mum and Dad's downstairs pad. After all, Ben will own it all one day anyway - right?

Sorry - we digressed from the serious work of research in a feeble attempt to portray the typical Gen Y'er. The HIA's popular press release (written up in virtually all daily newspapers recently) covered every media angle with a state by state breakdown which showed that more Victorian Gen Ys are living at home than anywhere else in the country.

Around 23% of Victoria's Gen Ys in the 25-29 age bracket are still living at home. In other states and territories, the 25-29-year-olds are showing signs of moving out. Only 14% in Queensland, 10% in South Australia and 15% in WA still live in the parental home.

HIA chief economist Harley Dale says the proportion of older Gen Ys now living at home, Australia-wide, is well above 1989 levels. In that year, only 12% of people in their late 20s were still living at home, compared to 18% in 2006 (the latest figures available). The proportion of all Gen Ys still living at home ranges from 54% in Victoria to 39% in the Northern Territory. The proportions were also high in NSW (53%), and South Australia (53.5%). It's probably relevant, though, that Melbourne, Sydney and Adelaide all have higher proportions of Asian and European migrants, who tend to have a culture of young adult children living at home.

According to Dale though, in 2008 Gen Ys are still living with Mum and Dad "because they could be trying to save for a deposit, or because they can't afford the soaring cost of rent". He says: "If you're in your twenties on a low-to-middle income and looking to buy a home, it's becoming virtually impossible."

And according to Australian Property Monitors, demand is intensifying as a result of strong immigration patterns and a weak building sector. APM general manager Michael McNamara says rising rents are being driven by higher mortgage costs, at a time when high interest rates are deterring renters from making the shift into home ownership. With rents rising 17% in Melbourne and 15% in Sydney, it's not difficult to identify this as one of the reasons those cities have the highest proportions of Gen Ys still living at home.

The HIA continues to champion the need for more new dwellings. Dale says fewer than 20% of first-home buyers bought a new house and suggests this is because of the drastic shortfall of new housing.
"HIA research confirms that in FY2009 we will require 190,000 new dwellings nationally to care for the increasing population - and we're going to fall about 40,000 dwellings short," he says.

The HIA's survey (based on FY2006 data) describes a trend which can only get worse. Increased fuel and food costs will exacerbate the problem for Gen Ys who don't earn big salaries and who are already struggling to find somewhere affordable to live. According to the Natsem-AMP report of July 2007, 35% of their income was being spent on housing and transport.

That figure will be higher now, with both rents and fuel costs soaring in the past 12 months. According to the latest Australian Property Monitors' report on Australia's capital city rental markets, weekly housing rents rose between 13% and 17% in all cities except Canberra (+5%), Adelaide (+5%) and Hobart (+6%) over the 12 months to June 2008. Unit rents rose between 3% (Brisbane) and 25% (Perth), with other cities recording rent rises between 7% and 13%.

And although Gen Ys had a net worth of $80,880 (and spend less on food and alcohol than the slightly older Gen Xs), debt is an issue - 23% have a HECS debt, 55% have credit card debt and collectively, Gen Y owes about $60 billion! They will eventually catch up, but for now the average superannuation balance is just under $10,000.

In 1989, safe to say, more households were making do with smaller, older-style homes, often described as three-bedroom when in fact they were two bedrooms with an enclosed veranda. So these days, when Mum and Dad are rattling around in a five-bedroom two-level house with room in the garage for three cars and a set of golf clubs, why wouldn't their Gen Y children commandeer the renovated basement flat and tuck $150 a week or so into the household kitty?


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