Anecdotal evidence suggests Generation Y feels "locked out of the housing market", resigned to being renters for the foreseeable future, credit bureau Veda says.
Veda’s managing director John Roberts says the company's first quarter data shows a 32.6% drop in mortgage enquiries from Generation Y versus the first quarter of 2013, following on from a 27.2% fall in the October to December quarter last year.
"Anecdotal evidence suggests that this generation now feels that they are locked out of the housing market and are destined to be renters for the foreseeable future," Roberts says. "Based on this, they are in the market upgrading cars and buying other consumer durables to enhance a lifestyle that home ownership would normally offer."
Personal loan applications rose 12.5% in the March quarter with the biggest growth coming from Generation Y at 14.1%.
Mortgage applications from Generation X fell 13.5% in the first quarter, following a 17.2% drop in the fourth quarter of last year. Roberts said Generation X recorded a 12.6% first quarter rise in personal loans.
The Reserve Bank introduced restrictions on banks' high loan-to-value ratio (LVR) residential mortgage lending from October 1 last year. This means only 10% of banks' new lending flows can be loans where the borrower doesn't have equity or a deposit worth at least 20% of the house purchase price.
"Analysis of credit applications following a mortgage application would suggest that a percentage of this group are using unsecured loans to assist funding the required deposit for home ownership with the new loan to equity rules," says Roberts.
"This could have an impact on credit fragility. If there are any significant adjustments in interest rates, as predicted by most financial commentators, over the next couple of years then rate rises on more costly unsecured finance could place stress on family finances. "
In terms of the percentage noted above using unsecured loans to help get house deposits together, Roberts says this is "theory based on the trend." Veda plans to analyse this further and next quarter might be in a position to provide detail.
Overall Veda said personal loans rose 12.5% in the first quarter, hire purchase applications rose 4.3%, and credit card applications rose 4.1%. Housing loan applications fell 6.4%.
"There is not only a strong recovery in the credit demand cycle with some of the strongest increases seen since the global financial credit crisis, there are also some emerging trends that will impact on the credit quality of New Zealanders as the economy grows through this economic recovery cycle," Roberts says.
39 Comments
Generation Y can thank the following
- Auckland Council city limits policy
- Auckland councils subdivision costs, charges and levies policy
- RBNZ cheap money policy.
- Protectionist policies such as those that give GIB BOARD makers tarriff protection from imports
- Labour's open door migration policy from 1999 to 2008 which set off the cracker
- Immigration New Zealand's loose implementation of the migrant policies.
- Nationals policy to steer funds away from housing investment to the "productive Sector " ( whatever that is ) , so fewer houses were built
I read a fantastic quote the other day:
Most people's biggest expense is interest, which comes from living beyond your means; and buying things they think will impress others, which comes from insecurity. Avoid these two and you'll grow richer than most of your peers.
Careful raegun, that sounds xenophobic or racist. However truthful it may be.
Being an election year its best not to talk about these issues, if we can avoid the topic long enough we may just end up with street signs in other languages too.
Nothing to worry about here, we're all ROCKSTARS!
And? I work three jobs including weekends - this is normal for Generation Y. We're expected to work overtime and always be available, don't claim you worked harder than us. The best way to compare is by average income to house price - what year did you buy your house?
I take it Gen X is born 66-76, Gen Y 77-94?
I'd then have about 50 cousins, cousins-in -law, siblings plus all their spouses/partners that are Gen X and Y - 50/50 split. Maybe 1 in 10 doesn't own their own NZ house.
I think it's more the ones after in their 20's now that have the problem. The only gen X'ers I know that don't own their own houses are the ones that worked overseas in high paying jobs and had awesome holidays.
By some accounts I'm gen y. By others I'm gen x. I think of myself as gen x with a small dash of y.
1. Cost of your first house purchase? $216k - a one bedroom unit in Auckland in 2006.
2. Portion of mortgage repayment to salary? - About 20% in the first year
3. Time to repay mortgage? - 5 years if I wanted to. I bought more property though.. of course.
4. Cost of your University degree/s if any? $40k-$50k in course fees alone
The only real difference I see for gen y'ers is the lvr situation, which I accept is massive to overcome. Other than that, if you start with something modest you can do it. Lots of affordable units around. Not dream homes but they'll be good for a few years until you can step up.
Sold up the river by the older generation. People I know have been searching for their first homes and they keep getting outbid by baby boomers and foreigners. Often these houses would be back on the market with a huge mark-up after a new lick of paint. This is the elephant in the room - housing in this country has been reduced to a simple commodity and the market is rife with over-investment, speculation and hot money. The system is broken and greed is rife but we will have our day.
You were just born at the wrong time. 2002 to 2004 assets were cheap, interest rates were relatively low and baby boomers were ready to pounce as we were in a position to use our debt free homes as collateral security for loans to buy those cheap investment properties. And did we pounce ,some more than others . We were not clever ,just lucky. We will never see an opportunity like this again in our lifetimes. Such cheap assets to buy and low interest rates. Unless of course terrorists hit the west with a massive event such as they did in 2001. Then fear will sit in the market ,central banks will drop rates to prop up markets and opportunities will come knocking again. Never say never.
Comes back to the wanting to buy champangne on a beer budget... I purchased my first home in a less than desirable area, mates all went on holiday and had the fancy CRXs, thought I was mad working my weekends fixing up that expensive dump... sure glad I did it now.
Sheryl Crow has it all worked out in the first verse.......
http://www.youtube.com/watch?v=KIYiGA_rIls
With all this gloom and generational ego inflation I think a Friday funny is in order.
THREE WOMEN, TWO YOUNGER, AND ONE SENIOR CITIZEN, WERE SITTING NAKED IN A SAUNA.
SUDDENLY THERE WAS A BEEPING SOUND. THE YOUNG WOMAN PRESSED HER FOREARM AND THE BEEP STOPPED.
THE OTHERS LOOKED AT HER QUESTIONINGLY. "THAT WAS MY PAGER," SHE SAID.. "I HAVE A MICROCHIP UNDER THE SKIN OF MY ARM."
A FEW MINUTES LATER, A PHONE RANG. THE SECOND YOUNG WOMAN LIFTED HER PALM TO HER EAR AND BEGAN TALKING.
WHEN SHE FINISHED, SHE EXPLAINED, "THAT WAS MY MOBILE PHONE. I HAVE A MICROCHIP IN MY HAND."
THE OLDER WOMAN FELT VERY LOW-TECH. NOT TO BE OUT DONE, SHE DECIDED SHE HAD TO DO SOMETHING JUST AS IMPRESSIVE. SHE STEPPED OUT OF THE SAUNA AND WENT TO THE BATHROOM.
SHE RETURNED WITH A PIECE OF TOILET PAPER HANGING FROM HER REAR END.
THE OTHERS RAISED THEIR EYEBROWS AND STARED AT HER.
THE OLDER WOMAN FINALLY SAID.........."WELL, WILL YOU LOOK AT THAT......I'M GETTING A FAX!!"
Every 'generation' is the same...saying their parents had it better. Banks are lending 10% to those that show good monthly saving plans - E.g. not those that get 50k from mummy and daddy. You can buy a half decent house in Auckland still for $450k (yes - sorry you cant live in Ponsonby) but will be out in GI or North Shore, West etc
The smart ones probably are buying rentals out there and then flatting in Ponsonby getting the double bubble of getting all their interest and expenses tax free on the rental (why would you live in your own home!?)
I really think IPhone's just drain away any intelligence in Gen Y and good luck them. Wish i had an IPhone but i dont because i save & invest....
Here's some more evidence that high house prices are here to stay:
http://tvnz.co.nz/q-and-a-news/nick-smith-twenty-year-goal-affordable-h…
Smitty, talks about incomes rising to increase affordability. He says nothing of house prices coming down. House prices can never come down nominally. The number is on a ratchet system. Only goes one way. Which is up, up, UP.
Even if there is a massive jump in one year, the price is stuck up there. It can never be brought down.
Smith says 20 years for a return to median multiples of 4 !!
He says the government doesn't have a magic bullet !!
The gummint could re-jig everything by tomorrow if it wanted to. But it won't because the majority of kiwis love things the way they are. Their slogan is "eat the under 30's!!"
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