Young adults throughout the country are battling worsening housing affordability, with nearly two-thirds (62%) of young adults still living at home saying they cannot afford to move out, according to CoreLogic’s Perceptions of Housing Affordability Report 2017.
The report, which was conducted by Galaxy Research, reveals the emergence of an increasingly dependent generation. Prospects are so dim that 21% of those aged 18 or over said they expect to remain with their parents until they’re at least 30 years old.
This phenomenon could see the rise of the “Cubby House Syndrome,” in which parents try to fashion semi-independent living arrangements for their adult children in their existing homes.
Coined by CoreLogic CEO Lisa Claes, Cubby House Syndrome could be the reluctant compromise for young people unable to “follow the traditional rite of passage of buying their own home.”
“Protracted affordability pressures means the outlook is bleak for many young people who want to fly the nest, so parents and their offspring need to be increasingly resourceful and innovative in the way they approach this challenge,” Claes said. “On the plus side, parents may have space like a garage or rumpus room at their disposal, and with a little creativity, could make use of it to give young people some semblance of independence, even when they can’t afford to fly the nest completely. ‘Cubby Houses’ could well be the new granny flats.”
While 62% of respondents said having a well-paid job is the best means of getting onto the property ladder, 30% said they are holding out for an inheritance to help them purchase their first home, or are relying on some assistance from their family.
“If you’re not downsizing your property, freeing up equity and [giving] your kids a helping hand …then look at the land you have at your disposal. Extending your home outwards is another option,” Claes said.
For many young Australians, the dream of homeownership seems further out of reach. CoreLogic’s report indicates that 62% of Aussies believe housing affordability is worse now than it was a year ago, and 58% believe the outlook for next year will “remain the same or [will] deteriorate further.”
Nationally, saving for a deposit is seen as being the biggest impediment to buying a property, followed by stamp duty costs and the threat posed by foreign investors.
What can young people do to help themselves?
While prospects may appear grim for many young people struggling with rising house prices and low wages, the situation isn’t exactly hopeless, according to the experts.
“I think the first thing millennials need to do is understand that they need to sacrifice almost everything to get a start in the property market,” said Todd Hunter, founder of property investment firm wHeregroup. “Now this is no different to when I purchased my first property and it was the same for my parents, too. I worked six days a week, plus bought and sold second-hand cars to build up enough money to buy a home.”
In today’s technologically driven economy, young adults can work full-time jobs and spend their evenings and weekends doing lucrative part-time work, like driving for Uber, according to Hunter.
“Young people have to be prepared to make sacrifices. Buying property has never been easy and it’s not going to get any easier,” he said.
If they do save enough for the down payment and secure the necessary income for the repayments, young people may have to settle for what they can afford, instead of going for the ideal. “You may have to settle for perhaps a studio apartment or one-bedder in a suburb you probably don’t want to live in. But it’s not going to be your home for life. It’s a stepping stone to bigger and better things,” Hunter said.
Another strategy to get onto the property ladder would be to purchase an investment property to create wealth. “In a few years’ time, young people may be able to sell their investment property and increase their deposit enough to be able to buy their first home,” Hunter said.
There is unfortunately, a downside to property investment. “The reason millennials are complaining about property is due to affordability. So by investing in a cheaper or regional area, in the hope of making good capital growth and then selling again so that they can then buy a home, this means they’re contributing to the very problem they’re complaining about. By investing in up-and-coming areas, they’re making property unaffordable for those who live or want to live where they’ve invested,” Hunter said.
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