Which generation had it harder – yours or your parents? It’s common dinner table conversation for Generation Y and their Baby Boomer parents.

Gen Y – those born during the 1980s and early 1990s – argue that they missed out on free tertiary education, that job availability is on the decline and welfare is shrinking. These concerns, combined with rising house prices, lead Gen Y to believe that buying a home is tougher today than it has ever been.

However, Baby Boomers counter that they had to contend with high interest rates and single incomes in the household, and that Gen Y aren’t willing to make sacrifices – smashed avocado for brunch, anyone?

We’ve pulled out the facts to help settle the argument once and for all.
 
  Baby Boomers Gen Y
Median house price Capital cities in 1975
  • Sydney  $34,300
  • Melbourne $28,700
  • Brisbane $23,700
  • Adelaide $26,150
  • Perth $24,500
  • Hobart $25,850
  • Canberra $33,600
Capital cities in 2016
  • Sydney $780,000
  • Melbourne $576,000
  • Brisbane $479,000
  • Adelaide $420,000
  • Perth $480,000
  • Hobart $306,000
  • Canberra $550,000
Standard Variable Home
Loan Interest Rates
10.2% during 1975 5.2% during 2016
Australia’s average wage $7,618 in 1975 $78,832 in 2016
Cost of living $.57/ litre petrol $1.20/ litre petrol
     

What these numbers show?
Yes, housing is more expensive today than it has been at any time in the last 50 years. In 1975, the median house price in Adelaide was $26,150 compared with $420,000 today.

If we turn our attention to the eastern states, the median price in Sydney in 1975 was $34,300. Now it’s about 23 times the price at $780,000 – thanks to skyrocketing house prices over the last decade.

From 1975 to 2016 the average annual income for Australians has risen from about $7,600 to $78,000. This means that in 1975, house prices were about three to five times the annual income of Australians, depending on your market. Today, it’s about 10 times for a Sydneysider and about six times for Adelaide residents.

This seems to settle the argument, but when you consider there are more double income households today, the gap isn’t as dramatic as it appears.

Looking at interest rates, today they are half what they they were 1975, driven by a record low Reserve Bank of Australia cash rate of just 1.75 per cent, which makes repayments more affordable for current home owners.

 

Get into your own home sooner

Home buyers on the decline

There’s no argument about the fact that the number of first home buyers making it into home ownership is on a steady, but constant decline, and at the lowest levels ever recorded. On top of this, the age of first-time buyers is increasing. In the 70s, the average age of the first home buyer was 25, while last year it was hovering around 38.

This could tell us that now is the toughest time in history to buy a home. Or as Baby Boomers would argue, it could show that Gen Y is simply not willing to make the sacrifices required to save for a deposit and take on a large financial commitment like owning a home…

Does Gen Y prefer to spend their money on overseas trips and regular social outings? Or are they the victims of unfortunate timing, being caught in a housing market where prices are booming and the low interest rates are benefiting mum and dad investors, more than them?


Take-away message

There’s no doubt home buyers today have it tough – but whether they had it harder than their parents, we may never know.

Whichever generation you belong to, buying a home requires discipline, persistence and compromise, whether you need to save the many thousands of dollars required for a home deposit, or are willing to buy a small home in an outer suburb to build equity before upgrading.

The best advice for the current generation of home buyers is to roll-up their sleeves, save, sacrifice and compromise.