Home Ownership Dream Fading For Generation Y

First home buyers.
First home buyers.

Emma Huber and Yonatan Miller were feeling confident when they set out on the search to buy a house. After all, they had a substantial deposit and their buying ambitions were modest. Surely, it wouldn’t be too long before they were settled in their new home, rearranging sofas and debating shades of taupe. So, every Saturday they’d get up early and race to view any property that seemed a likely prospect, based on the listing and agent’s price estimate. It wasn’t long, however, before reality set in.

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“After a while you just stop because you know it’s going to be a waste of time,” says Huber with a sigh. “Either it’s well within your price range, but you wouldn’t send your worst enemy to live there, or it’s nowhere near your price range and you’d love it. You think, ‘I don’t want to be disappointed, I’m not going.’ It’s deflating.”

Sound familiar? If you’re a potential homebuyer, you’ve probably spent your Saturdays in exactly the same state of high hope and plunging disappointment. Like Huber and Miller, you probably know firsthand just how hard it has become to get a toehold in the Australian property market. Perhaps you’ve even given up your vision and become philosophical – or not so philosophical – about renting, although that’s not cheap or easy these days either. Or maybe you’ve found a creative way to skirt around the bleaker realities of the property landscape.

Either way, if you’re feeling you’ve got it tougher than previous generations, you’d be right. Take this figure: in 2001, more than half the suburbs in Australia’s capital cities were classed by property experts as “affordable” to buy into. Now it’s less than five per cent, and not one of those is an inner-city suburb. Even regional areas have been “infected” with the same price rises, says Ben Phillips, principal research fellow at the National Centre for Social and Economic Modelling (NATSEM).

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For first-time homebuyers like Lucy Bryson, it’s all very alarming.

“I would love to be in a position to buy, to be investing in my future, but I feel like I am going to be stuck renting forever,” laments the 31 year old.

Bryson, an architect, lives in an unrenovated, one-bedroom unit in inner-Sydney Potts Point. Rent, she says, eats up nearly half her salary.

“Living on my own means there is no way I can pay for my place and save for a deposit. I find it frustrating that I have a good job and earn a reasonable wage, but I have very, very little prospect of getting into the property game.”

It was a different story for Bryson’s parents. Her mother, Sarah, paid $29,000 for her first home at the age of 23. Her father had bought an unrenovated apartment in a harbourside suburb before he was 30 years old.

“By the time my parents were my age, they had bought and sold several properties and made good profits. They were so much further ahead. The only way I am going to be able to buy as a single woman is if I win the lottery.”

Bryson has an annual income of nearly $100,000. If things followed the same formula as the two generations before her, she’d be able to pick up a nice first home for around $275,000. But everything has shifted.

“The Australian housing ladder used to work pretty effectively: you’d leave the family home, move into the private rental market for a short period, and then, typically on marriage, move into home ownership,” explains Dr Ian Winter, executive director of the Australian Housing and Urban Research Institute (AHURI). “Today, the rungs on the housing ladder are just too far apart.”

Think of the difference between what you earn and what you’ll pay for an average house as the BMI of property prices: in less than two generations we’ve gone from a small, trim figure to a bloated number that pushes would-be buyers into the red zone.

Phillips explains: “If you go back to, say, 1970, we had average house prices of about $12,500 – about three times the typical income. Now, nationally, we have average house prices of $420,000 – about six-and-a-half times the average income. In Sydney, the typical house price is about nine times the median household income.

“First-time homebuyers are the ones who are struggling. They’re staying in rental properties for longer. They’re getting into housing later, they’re having to take out a very large loan and they’re taking longer to pay off their loan,” he adds. “The people who gained from the increase are those who bought back in the ’60s, ’70s and ’80s – and even into the ’90s.”

There are numerous theories being floated around about how to increase housing affordability, but definitive answers are in short supply. Some of the suggestions – such as building more apartments and smaller houses – are long-term strategies that will have little impact on current property seekers.

But, like the people in the case studies in this story decided, perhaps it is time to come up with a different strategy – and even a different way of thinking about how we are living our lives – to effect real change.

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The financial sea change

With a combined annual income of $73,000 and the unpredicatable earnings and sporadic work history common to hospitality workers, there was “no way in hell” bartender Emma Huber, 36, and chef Yonatan Miller, 38, could have bought property in Sydney without parental help. Miller’s parents inherited money and offered to let their son use $100,000 of it – if, and only if, it went towards buying property. So just two years into their relationship, the couple entered the market. But even with a six-figure deposit, they had to find something they could actually pay off.

Finally, after six months of intensive searching, they “got very, very lucky”, paying $530,000 for a “one-and-a-half bedroom” flat in Rose Bay. “The first thing we did was put up an $8 knife magnet,” laughs Huber. Miller grins: “We didn’t have to ring anyone to find out if we could put a screw in the wall.”

A little over two years later, Huber was pregnant and their tiny unit (70sqm) seemed cramped. Money was tight; they couldn’t afford anything bigger in Sydney. But one day, driving the 85km south to Wollongong to visit her parents, “something just clicked”. The couple moved in with Huber’s parents until they were sure, then took the plunge, buying a two-bedroom house in the suburb of Woonona within walking distance of the beach. Their block is 700sqm – 10 times the size of their Sydney flat. They paid $535,000. With the profit they made selling the flat after just three years, they opened their own cafe, Sandygoodwich.

They have two kids, a thriving business, a big property, chooks and a dog. Yes, they’re each working 80-hour weeks at the moment and are sorely sleep deprived, but “it’s been a good move without a doubt”, says Huber. “In Sydney, we were just getting by. You never felt like you could get ahead, or save any money. Here we work damn hard, but we’re building something up, and if you can get half an hour free, you can be on a completely undeveloped beach with dogs and kids, you can reconnect with what matters.”

So what property advice will they give their kids? Miller doesn’t miss a beat: “Be good to your grandparents.”

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The long-term renter

Charlotte Ree is only 22, but she's a renting veteran, now in her sixth leased house in five years. “I’ve had a whole variety of experiences,” she reveals. “I’ve lived with my best friend and it was the best thing in the world – until girls do that usual friendship thing where something happens and you break up. I’ve woken up to flatmates snorting cocaine outside my door. I’ve had flatmates steal clothes. I’ve also had some really, really good experiences, but to say that I’m over sharing a place is an understatement. That’s why it’s just me and my boyfriend this time around."

Ree, a book publicist, and her boyfriend, Diego Vidal, who is studying business and working full-time managing restaurants, have a combined annual income of about $100,000. But they cannot get into the Sydney property market, and have resigned themselves to renting for a few more years yet.

“We’ve been to rental inspections where there were another 50 couples standing in line. It’s so competitive, it’s awful,” comments Ree.

“We had to leave our last place because there was a mould outbreak in the kitchen. The real estate agent wouldn’t fix it. They would come in and repaint it, and then it would come back. We had to threaten to take them to the Tenancy Tribunal. We now pay $680 for a two-bedroom place in Glebe, which we can only afford because my mother works in Sydney one week a month and her company gives her $150 for accommodation – she pays it to us and stays here.

“These are inner-city prices, but I work in the city and I want to live in the inner city,” she says. “Whatever we’d make up for in cheaper rent further out we’d lose in time and transport costs to get to work.

“They wouldn’t give us any longer than a six-month lease on this place, which is really distressing because at the end of it I’ll be away travelling for work and if we do have to move it will be such a stress. If they do renew they have the right to put the rent up to $700, $750 a week.

“We’ve been saving like crazy to put together a deposit – we’re aiming for $60,000. But even with the First Home Owner Grant (www.firsthome.gov.au) it will take us years. We want to travel, and this year we’re travelling to the US and Mexico and Cuba for five weeks. We want to do Europe, too, but we said, ‘No, we’ve got to save for a house.'"

Ree reckons it will be another five or six years at best before she and Vidal have accumulated enough of a deposit to enter the property market. Even then, they will probably only be able to afford to buy an apartment in a suburb in outer western Sydney as an investment, and rent it out. It’s not their ideal, but it’s a plan.

The first-home builders

Two crucial advantages meant that Adelaide couple Brett Schembri and Lisa Halpin were able to afford a home of their own: first, the city’s relatively low property prices, compared to other capitals; and second, a lender called HomeStart Finance (www.homestart.com.au), a body set up by the South Australian government specifically to get people on to the property ladder. But there was sacrifice.

“We were about to start planning our wedding, when we decided to go for the house option instead,” reveals Halpin.

Schembri, 26, a technical analyst, and Halpin, 29, a casino supervisor, had a combined income of just over $100,000 and were in their third rental, paying $320 a week for an older house with “a few maintenance issues that weren’t getting fixed”, says Schembri. “It was frustrating, thinking, ‘We could renovate this,’ and not being able to.” They looked at existing houses, going to inspection after inspection, but, “when we started comparing the areas we wanted to live, it was almost the same price to build as buy”.

Then a development opened in the southern suburb of Morphett Vale, close to their families, with a $328,900 house/land package they liked. “We had a lot of issues getting financial approval, because things were tight and we were first home buyers,” recalls Schembri. Other lenders wanted a 20 per cent deposit, but HomeStart required only 4.5 per cent. Equally importantly, the scheme also offers preferential repayment terms.

Having lived with her parents for months to save money, a heavily pregnant Halpin, Schembri and their two-year-old son, Connor, moved into their brand-new home in May. “We wanted three good-sized bedrooms, a couple of living areas and a couple of good-sized bathrooms, and we got that,” says Schembri. “It’s great.”