Tension between generations becomes an unintended consequence

The housing affordability crisis is having unintended consequences between generations, according to economist Professor Rachel ViforJ.

“There’s definitely growing intergenerational tension in the housing market. Most people who are home owners are older and many of them would have bought back in say the 1980s, or the 1990s, just before the worldwide housing boom.”

“If you bought just before the housing boom, then you would be enjoying a huge amount of capital gain,” said Professor ViforJ. Unfortunately, what that means is that it’s actually locking out growing numbers of young people from being able to access first home ownership.”

The divide was not just between generations but between classes, she said. “If you’re a young person, but you have access to the bank of mum and dad, you’ll actually find it easier to be able to buy your first home”

That was the case for 25-year-old bartender Connor Roche-West who just purchased his first apartment in Sydney’s lower north shore this past weekend. Mr Roche-West was thrilled. He said it had been a long hard journey to buy a property in the current market where he was often outbid by other buyers, some of whom he believed may have been investors.

“It’s rough knowing it’s going to be back on the market in a couple of weeks for renting, but it is what it is, there’s not much you can do”. He said he was able to purchase the apartment with some financial help from his parents which he said he was very grateful for.

The unfortunate reality was that it was “damn near impossible” for young people like him to get into the housing market without such monetary support, Mr Roche-West said.

Real estate agent Ajay Valanju who sold the apartment to Mr Roche-West said he had noticed an increase of investors since the start of this year. “Last year it was mainly owner-occupiers who were active but now we’re seeing investors coming back into the marketplace.”

The tension at some auctions between different bidders is sometimes palpable. “It’s definitely the case that when you have large numbers of investors wanting to purchase properties, as well as large numbers of first home buyers wanting to purchase properties, that there will be intense competition for the limited supply of housing that’s in the market,” Professor ViforJ said.

“And of course, with rental investors, typically, they’re on higher incomes than first home buyers, typically they have more equity behind them, and therefore more financially well off.”

Below IMAGE – The Commonwealth Bank’s own data shows most of those with investor home loans are comfortably earning six figures.(Supplied: Commonwealth Bank of Australia)