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

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

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

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

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.

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.

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

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!
 

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)

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?

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

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)
 
 

Sounds like an absolute steal mate.

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

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.

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?

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.

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 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.

Ahhh ok Darth...

Ahhh ok Darth...

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....

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.

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.

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)
 

"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.

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.

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

Sheryl Crow has it all worked out in the first verse.......
http://www.youtube.com/watch?v=KIYiGA_rIls
 

The Verve has it all worked out in the first 3 lines
www.youtube.com/watch?v=lbvQ9g1CYs
 

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!!"

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?

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.........

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....

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
 

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

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

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".

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-ho...
 
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!!"