Gen Y feels 'locked out of housing market'

Personal Finance

Veda says Generation Y is turning to personal loans for cars and consumer goods because they feel locked out of the housing market

11th Apr 14, 10:13am by Gareth Vaughan

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

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.

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39 Comments

by Boatman | 11th Apr 14, 10:47am 1397170069

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

by meh | 11th Apr 14, 12:59pm 1397177977

Or they can thank the collective desire of every individuals desire to be materially rich, to have more, and to keep up with society's expectations of what their lifestyle/standard of living should be.

by Zoltuger | 11th Apr 14, 1:52pm 1397181123

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.

by raegun | 11th Apr 14, 5:04pm 1397192697

You forgot non resident foreign buyers helping to push prices to ridiculous levels

by RealMe | 14th Apr 14, 4:00pm 1397448053

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!

by Chairman Moa | 11th Apr 14, 1:16pm 1397178973

yes to all of the above and they can work their bxtt off like the previous generations did (well I did anyway, 3 jobs to save up deposit for our first home @13.9% interest rate)

by Value Added | 11th Apr 14, 2:10pm 1397182218

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?

by rjf | 11th Apr 14, 2:16pm 1397182590

What was your income and what did the house cost? What was the rate of inflation at the time?

by Chairman Moa | 11th Apr 14, 2:38pm 1397183925

paid $284,000 for a house in Ngaio (Wellington) on a total income of about 42K, inflation was about 4.2% (according to RBNZ). My car was a Skoda 120 cost me 3.5K. That same house would be about 6.1 times my income right now (and I still have a cheap car)

by Value Added | 11th Apr 14, 7:28pm 1397201302

Sounds like an absolute steal mate.

by Machiavelli | 11th Apr 14, 1:25pm 1397179543

Some say gen y'ers seek instant gratification. This article seems to confirm that.

by Value Added | 11th Apr 14, 2:12pm 1397182358

And who have we learnt off? The amount of baby boomers I know who always have a wine in their hand, buy fast cars, baches, boats and go on overseas holidays is phenomenal. A lot of them are deeply in debt.

by frazz | 11th Apr 14, 2:05pm 1397181920

Can you clowns let us Gen Xs on the following
1. Cost of your first house purchase?
2. Portion of mortgage repayment to salary?
3. Time to repay mortgage?
4. Cost of your University degree/s if any?

by rjf | 11th Apr 14, 2:20pm 1397182802

No, no, they don't like to talk about that. They like to talk about high interest rates without any context. They had it harder than us, even with our 8-10 income to house price multiples. Our problem is we have too many iPods and Sky TV.

by bob | 11th Apr 14, 2:39pm 1397183945

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 Machiavelli | 11th Apr 14, 2:44pm 1397184266

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.

by Value Added | 11th Apr 14, 2:06pm 1397182002

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.

by Your Landlord | 11th Apr 14, 2:27pm 1397183279

You wont have your day Value Added because there are too many powerful forces conspiring to line up against you.

Your only escape will be to grow old and progress along the way.

by Value Added | 11th Apr 14, 3:33pm 1397187231

Ahhh ok Darth...

by Value Added | 11th Apr 14, 3:33pm 1397187235

Ahhh ok Darth...

by notaneconomist | 11th Apr 14, 5:00pm 1397192401

Those BB's and Foreigners must be pretty slick - if they keep pipping you at the post.......image what an old head on young shoulders could achieve....

by gordon | 13th Apr 14, 12:55pm 1397350556

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.

by Brendan | 11th Apr 14, 2:42pm 1397184173

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.

by Kakapo | 12th Apr 14, 6:13am 1397240022

This is just pernicious bollocks and pure propaganda. They're not demanding champagne on a beer budget, they're being forced to pay Dom Perignon prices for stale Lion Red.

by cowboy | 12th Apr 14, 11:11am 1397257915

when the waters all been claimed by the corporation, what is the market value of that Lion Red? (considering in Africa most water had to be fermented to kill bacteria and parasites, it's an even more interesting comparison)

by Smalltown | 11th Apr 14, 3:11pm 1397185892

"Squatting" was the word in London back in the 80's. Once Gen Y cottons on to all the empty Asian houses we will probably be seeing the word used again here in NZ.

by homesy | 11th Apr 14, 3:24pm 1397186683

Value Added,

I hope you don`t lose heart and start thinking outside the square and perhaps further afield with your friends.

An old wealthy farmer told me the other day,you never pay too much for land you just pay it too soon.

by cowboy | 12th Apr 14, 11:22am 1397258534

but you can pay too much for the cost of money. if the land is returning less than debt service (or near to it) then they're deliberately running the operation at a loss/anti-competive margin in order to secure capital gain. aka Tax Evasion

by notaneconomist | 11th Apr 14, 3:53pm 1397188395

Sheryl Crow has it all worked out in the first verse.......

http://www.youtube.com/watch?v=KIYiGA_rIls

by meh | 12th Apr 14, 10:05am 1397253906

The Verve has it all worked out in the first 3 lines

www.youtube.com/watch?v=lbvQ9g1CYs

by notaneconomist | 11th Apr 14, 4:02pm 1397188949

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!!"

by scarfie | 11th Apr 14, 4:07pm 1397189245

It would have been more impressive if she had lit the toilet paper, then you would have the Dance of the Flaming Arseholes. Perhaps more in fitting with the theme of this article?

by notaneconomist | 11th Apr 14, 4:50pm 1397191824

It is just as well life is 90% attitude and 10% know-how......it makes it easy to know which one you have to watch over the most.........

by keywest | 11th Apr 14, 8:53pm 1397206407

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....

by 28_29 yr old | 11th Apr 14, 9:38pm 1397209135

Tail end GenY/ border Gen X

first home bought 2006 340k- now worth $600k- buy in an up and coming suburb. Never listen to the ones who shout the loudest including bloggers

by doublegz | 12th Apr 14, 8:29am 1397248166

Bought my first home in Mission Bay in 1992 for $175k now worth $700k

Bought my 2nd home in Remuera in 2004 for $650k now worth $1.7 mil

by cowboy | 12th Apr 14, 11:12am 1397257965

would you consider yourself on an average/common NZ startout wage at that time?

by doublegz | 12th Apr 14, 11:44am 1397259854

Yes average Joe...still am. The capital gain I have experienced never changed my lifestyle and spending habit so far, still go to work everyday earning average income like everyone else. Like the saying goes, "It's only paper money".

by bob dringle | 13th Apr 14, 12:25pm 1397348716

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!!"