Lifetime
of renting a recipe for poverty
By RUTH LAUGESEN - Sunday Star Times | Sunday, 09 March 2008
Property-rich
baby boomers are locking young New Zealanders out of the housing market, setting
the scene for a widening generational wealth gap.
New research from the
Centre for Housing Research has found younger New Zealanders are buying homes
later, with the result fewer will be able to buy homes at all.
"The result is that
wealth levels probably won't be as high for this generation of under-35s as they
were for the baby boomers and older," said Victoria University Human
Geography Professor Philip Morrison, author of On the Falling Rate of Home
Ownership in New Zealand.
The report found someone
born in 1956 had a 75% chance of owning their own home at the time they turned
35. In contrast a 35-year-old in 2006 had only a 58% chance of owning their own
home.
"The later you get
into the housing market, the less time you have to build up equity. This
generation of late starters is not going to be able to generate as much equity
as their parents.
"They are coming in
with greater debt and much higher property prices relative to wages," said
Morrison.
He said because of the late
start, it was unlikely that younger New Zealanders would catch up to the
property ownership levels of previous generations.
Even if they did, it was
likely they would carry heavier debts.
Property has been the
cornerstone for ordinary New Zealanders' wealth, with some estimates that up to
80% of an average household's assets are tied up in residential property.
On the flip side of the
generational wealth divide, those who already owned property were multiplying
their wealth. Many baby boomers were using their property equity to buy extra
properties, and becoming landlords to their children's generation.
Retirement Commissioner
Diana Crossan said more parents and grandparents might have to help their
children or grandchildren buy property.
"People my age, early
baby boomers, paid somewhere around three times their income to buy a home.
Whereas now it costs something like seven times their average wage," she
said.
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Sunday Star Times Mar 2008
