Should we embrace Generation Rent?
As house prices have skyrocketed above median household incomes, many young people have essentially been priced out of the property market. Almost one-third of Australians are renting their current accommodation, according to a recent report from the Tenants Union of Victoria (TUV).
Who’s got the keys to The Castle?
Owning a home is a massive part of our culture. It’s not about four walls and a roof, it’s about the physical space your family occupies and how this feeds into your sense of self and identity as an Australian. Home ownership is frequently viewed as the ultimate end goal – the final step on the ladder to adulthood.
However, because more Australians are choosing to rent, the reality is that we are moving away from the traditional concept of the family home. So why can’t the perception of this idyllic home owner/occupier change as well? Why should higher earners have exclusive access to a national dream? In a market that seems to favour those with more investment capital, perhaps it’s time we moved beyond home ownership as a mark of maturity.
Could renting be the new normal?
The 2015 TUV report outlined that 24 per cent of renters are young families, while 20 per cent are couples without children. Many of these families and couples will be renting forever, with home ownership becoming too far out of reach in the current market.
The Australian Housing and Urban Research Institute (AHURI) recently reported that the number of renters has almost doubled since the early 1980s. Dr. Wendy Stone, AHURI director, agrees that many Australians will never be able to buy, and outlined that approximately 23.4 per cent of Aussies are renting right now. Rental properties in Australia peaked in 1947 at 44 per cent, although our population was slightly more than a quarter of what it is today. Even compared to the peak of rentals, there are a million more residents in rental accommodation in 2017.
As house prices increase at a faster rate than the average median income – Australia Bureau of Statistics reports a 10.2 per cent annual house price increase, while only 2.2 per cent for wages – based on this we could expect to see ongoing growth in the number of families and couples renting. Depending on what happens to the property market over the next few years, we may need to brace ourselves for a paradigm shift. Perhaps then, Australia will move away from measuring our worth through comparison with previous generations.
Is buying instead of renting the right move?
Interest rate fluctuations, taxes, insurance and maintenance costs can far exceed what you might spend on rent. Despite that, you will own a house at the end of your mortgage – providing you with equity and security.
Before you purchase a home, you should work out how much you’ll need to cover all of your mortgage payments and home expenses, plus a little bit extra to cover you for any large unexpected expenses, such as your fridge breaking down. If this equals $500 a week, and you’re currently spending $300 on rent and related expenses, you should start saving an additional $200 a week so you know you can afford your mortgage.
While mortgage stress is becoming more prominent in Sydney and Melbourne, the biggest thing keeping people out of the housing market at the moment is not having enough of a deposit. By saving what you would otherwise be spending on a mortgage, you should be able to make a dent into your required deposit.