The Cliff: Why more young people are giving up on home ownership
An increasing number of aspiring first home buyers are starting to question whether their struggle to save a deposit and buy a home is really worth it.
Picture being out on a run. It’s a hot summer’s day. You’ve reached the mid-point of your run. It’s a cliff face overlooking a beach. You look down to see the ebbing and flowing of waves along the shore. The water looks cool and inviting. You can even feel your body temperature dropping as you stare at it. Do you continue your run and push through the heat or do you walk down and dip your feet in the water?
After years of working (sometimes two jobs), many aspiring buyers are reaching their own metaphorical cliff face. And they’re having to make a decision. Do they continue to work hard and try to generate more income, despite the persistent feeling they’re not even close to having a deposit? Or do they cut back on the long hours and accept the reality that home ownership is a bridge too far?
Reports in Australia suggest fewer young people are willing to take on managerial roles because they don’t think the salaries are worth the effort. Same with starting a business. The fertility rate in this cohort is also plummeting. Those that reach the ‘cliff’ are now more likely to head for the water and cool their feet because others, who have continued to run in the sweltering heat, aren’t seeing the payoff.
Put simply, many young people have given up hope of heading down the same path as previous generations when it comes to home ownership.
Even those that get promotions quickly realise they have moved into a new tax bracket and their take home pay is not that much higher than before. Government handouts and attempts to solve intergenerational problems aren’t working either.
So what has to change? What will help young people regain hope?
For one, we need a combination of immediate and longer term solutions to close the intergenerational wealth gap. Building more infrastructure and housing will improve supply and bring it into line with demand, but, realistically, this will take decades to play out.
What about now? Real Estate Capital’s research shines a light on the prospect of an entire generation of Australians retiring and not owning a home. The Retirement Income Review 2020 noted that 48% of people who retire and don’t own a home fall into poverty. It is therefore imperative that something changes today.
Young people desperately need a new pathway to home ownership. Yet most lenders still require a 20% deposit (or lenders mortgages insurance) or rely on government schemes in order to assist first home buyers.
If you haven’t already done so, register your interest as a borrower here to learn more about Real Estate Capital and the low deposit, first home buyer loan we’re looking to launch soon.
