- With property prices having rocketed up in recent years, millennials assume it's never been harder to get into the market.
- Dealing with 17% interest rates when they were buying their first homes, baby boomers tend to disagree.
- We asked Corelogic head of research Tim Lawless to weigh in on the debate about who had it harder.
As long as there have been multiple generations, the older ones have been telling the younger ones how much better they have it.
Insofar as antibiotics, rising standards of living around the world, and then internet are concerned, they usually have a point. But it when it comes to Australia's first love, real estate, did boomers really have it harder than millennials?
Each generation would tell you their circumstances were worse, but which actually had it tougher trying to buy a home?
We asked property analyst group CoreLogic and its head of research Tim Lawless for his thoughts.
Millennials think they're going to struggle to buy a house after enormous house price growth
The perception of housing affordability looks to have gotten worse, according to CoreLogic's latest annual affordability report.
"90% of millennials think buying their first house is going to be something that's going to be very difficult to achieve and think they're going to have some real problems getting in at all," Lawless told Business Insider Australia at the launch of the report.
No doubt that's been part of a significant price boom in recent years. In Sydney and Melbourne, that's been particularly pronounced with prices rising 75% and 58% between 2012 and 2017, according to figures from the Reserve Bank of Australia.
Millennials need to do far more than give up smashed avo to get on the property ladder
Bernard Salt's comment that home buying would be easy if millennials just gave up expensive brunches is now infamous. What it's not is accurate.
CoreLogic CEO Lisa Claes describes "an unholy Trinity" of obstacles to buy a home.
"First they must raise a deposit. Then, gain approval for a loan. That's become tougher in the wake of the financial services royal commission. Then they must pay stamp duty, on average 3% of the purchase price," Claes said in the report.
All of those are now far harder for millennials, with prices pulling those costs higher.
"This year Australians said the deposit is the most difficult component of getting into the market, keeping in mind lenders are generally now looking for 20% deposit," Lawless said.
Once you've got that, you need to get a mortgage approved -- ranked as the second biggest hurdle, with lenders more reluctant to hand out credit. Last you have stamp duty, a controversial tax which is becoming increasingly expensive.
The figures indicate that millennials have a harder time buying their first home
So what do the numbers say?
While CoreLogic wasn't doing its affordability survey 40 years ago, it does have an accurate idea of the millennial predicament.
The average time it takes an Australian to save their first home deposit is 8.7 years -- down slightly from 9.2 years at 2017 prices. Depending where you live though that can really start to get away from you. In Sydney, for example, you're looking at 11.2 years on average, and 10.1 in Melbourne.
Another key metric is the price to income ratio. A ratio of five, for example, means house prices are typically five times higher than the than annual incomes, before tax within that area.
"Twenty years ago, a typical ratio was around four and a half time. Now, the ratio is generally around six and half and seven times," Lawless said. "Off that measure alone it's clear that getting into the market has become a bigger issue than it was."
Factoring in interest rates means baby boomers probably had a harder time paying their mortgage
The price of housing is no doubt higher now than it was, but interest rates are far lower. The official cash rate -- which helps set mortgage rates -- is currently 0.75%. In the early 1990s it was many times higher.
That brings in another measure of affordability -- how hard it is to pay off a mortgage.
"Boomers were paying down their mortgage at the same time that interest rates were at 17%. The asking price for those houses were obviously much much lower though but once you bought, servicing your mortgage was a little bit more challenging," Lawless said.
"At the moment that's not quite as hard as it was ten or twenty years ago because mortgage rates really haven't been this low for the last 50 years."
Lawless' conclusion is that both generations had/have their issues
Unsatisfyingly perhaps, Lawless is diplomatic in his conclusion.
"In terms of getting into the market, now I think that it's much harder for a younger generation who don't have the benefit of having savings and equity behind them to get in. But it is now actually a little easier to pay down the debt," he said.
The reality is that buying a first home has never been easy.
"I've been a property analyst for nearly 20 years and I can honestly say affordability has always been an issue," he said.
But there's more.
None of this, of course, touches on the broader economic picture which too has its place in the conversation.
Over the last three decades, for example, household debt to income levels have tripled from around 60% to 180% as house prices surged. Australians now have far more debt to pay down and service than they did, and their repayments are accordingly much higher.
On the flip side, we earn far more than we did 20 and 30 years ago. However, millennials could also argue that wage growth has been non-existent in recent years, and certainly completely outrun by price growth at the same time.
I guess we'll just have to agree to disagree. Now, pass the avocados.