Housing dream’s losing out

YOUNG adults are putting off forming new households because of unaffordable house prices, according to research by ANZ.

And there is little evidence to suggest housing affordability will improve meaningfully amid soaring prices and weak wages growth, a senior economist at the bank says.

In a report on the housing market, economist Daniel Gradwell says home ownership looks likely to remain a “challenge” for people aged 20-34 and the outlook for first homebuyers is “not encouraging”.

Because of high house prices, young adults are delaying attempts to form new households, he says, leading to more people living in each dwelling and reducing the demand for homes.

With falling interest rates leading to lower returns on savings, the time taken to save a deposit has blown out, Mr Gradwell says.

For an average household saving 15 per cent of disposable income, it would now take more than eight years to save a 20 per cent deposit for an average home, he says.

That compares with a sixyear savings period in 2012.

The picture is worst in Sydney, where average earners would need to save for more than 10 years to build a deposit, but Melbourne is close behind, at nine years.

ANZ’s research comes after a five-year bull run in the nation’s east coast capitals, with regulators moving this year to clamp down on riskier lending, particularly to investors. Analysts have suggested falling auction clearance rates and softening price growth indicate the clamps are starting to work.

The research comes after the Reserve Bank said the “generation rent” phenomenon reflected “higher housing prices rather than a shift in preferences”.