06 Sep Housing – it is not a 'forever' decision – Mark McCrindle
Demographer, futurist and social commentator, Mark McCrindle says ‘your first home isn’t likely to be your forever home’ but that doesn’t stop some people spending too much time worrying about their first purchase. You might be surprised to hear the average number of properties we live in during our lives, how long we stay in them and how that has changed over the decades. I know I was.
Kevin: There was an article that was out earlier this week that said your first home isn’t likely to be your forever home, and it got me thinking about how many people actually live in a home that they were actually born in and whether or not this mindset makes us maybe choose the wrong house or maybe puts us into a mode where we find it very hard to make a decision.
How many people actually buy one house and live in it forever? Joining me to have a look at the stats around this on Australians and the homes they live in is demographer, futurist, and social commentator, Mark McCrindle.
Good day, Mark.
Mark: Good day, Kevin.
Kevin: Nice to be talking to you again.
Kevin: Mark, how many people actually do buy one house and then live in it forever?
Mark: Very, very few these days. In fact, the trend lines are for us to be moving homes far more frequently now than we did in the past. One of the biggest drivers of that has been the massive increase in the numbers of people renting and renting for longer periods. We know from the Australian Bureau of Statistics data that the average renter stays 1.8 years per home.
Even if you have ten years in your twenties where you’re doing the rental thing, which is mainstream now – a lot of people have been renting for a lot longer than that – that’s five homes at least just in that ten-year period.
We know that those who are paying off their home – and actually the majority of all households still have a mortgage – they have an average tenure of eight years per home, so that’s not the 30 or 40 years of home ownership that perhaps our parents’ generation had, but eight years.
That’s because people will buy their first home – maybe it’s a unit or apartment – and they’ll pay that down a bit, and then they’ll jump up to maybe a townhouse as the kids come along or they need a bit more space, then maybe to a smaller home and then maybe another home down the track. We’re cycling through more property – even when we own it – than ever before.
Kevin: I’ve often thought, too, that a lot of people agonize over making that first purchase decision thinking that this is going to be the place they want to live in for the rest of their lives when it’s really only, as you’ve just demonstrated, sometimes quite a short-term prospect.
Mark: Exactly right. That’s eight years average, of course. Some people have the 25-year mortgage, they’re paying that home loan off over a long period, which means a lot of people are buying a home, living in it and moving on every three, four, or five years, so that’s the median.
Those who have paid off their home, if we track those, have been in their homes on average 18 years. That’s the older generation. That was the traditional way, the Aussie Dream; you buy the forever home and you stick with it. But as for the next generation coming through carrying the debt of the mortgage on that home longer, far more churn than ever before.
Kevin: Have you got any idea on how many homes the average Australian will live in during their lifetime?
Mark: We have done some figures on that, and it sounds astonishing, but if we think of the number of homes, whether we own or rent, throughout the full lifecycle, it’s 15, which is a lot. We have about three homes in our upbringing before we move into the adult years just based on the parents moving a little bit and maybe that trial move out of home and then bouncing back when the costs get too high.
There are three there, and there are three homes that we’ll live in in our retirement years. There’s the downsizing home, there’s maybe a shift to retirement living, maybe supported age care down the track, which means that there are nine homes that we’re living in in our adult years.
Many of those homes are in that mortgage period, as I said, for the decade or so, but then you have the three or four homes that people will own in their adult years, as well. That’s just a lot of churn, 15 different premises in which we will live in our lifetime.
Kevin: Mark, it’s interesting, isn’t it? I think you mentioned the average stay time is about 18 years if you’re purchasing a home, and if you think about that, that allows the kids to grow up. I’m just wondering about today’s youth, whether or not they’re staying at home a little bit longer, maybe moving with mom and dad, or are they just moving out?
Mark: They are staying at home longer than ever, into their twenties – and indeed, closing in on the mid-twenties is now the norm. But interestingly, the Bureau of Statistics did a study on this and found that all of those mid-twenty-somethings who are living in the parental home, half of them had already moved out and moved back again.
It seems in Australia as if we do stamp our independence maybe in the uni years or maybe just after uni, moving out with their friends, trying out the home share, maybe even renting your own place, and invariably, when it comes time to save a little bit more for the mortgage of one’s own place or just with the rising costs, people move back to the parental home. That’s what takes place there.
Yes, parents are supporting their children in the parental home a little longer, which can be helpful, but that creates this multi-generational household more than we ever had before where you have the adults there and often their twenty-somethings still living under one roof.
Kevin: Fascinating. I’m talking to Mark McCrindle, and you can follow Mark at his website, McCrindle.com.au.
Mark, we’ve established that our first home may not be our forever home. Are first homes still fairly typical of the way that they were in, say, the 1950s and 1960s – three bedrooms, one bathroom, one lounge?
Mark: No. We’re getting a lot more in our homes. This is where some of the figures… We’ve done a lot of this calculation that if you go back four decades ago to, say, our parents’ generation, when they were buying their first homes – the young people of today, their parents – in the mid-1970s, the average home was five times the equivalent of average annual earnings. Today, it’s ten times those average annual earnings, so in a sense, it’s twice as much. You have to save twice as long to get that home.
But if you think about the average home of today, it’s a lot bigger and better equipped than the average home of the mid-1970s. Our expectations of our first home is quite different. Baby Boomers are quick to point this out, but yes, we got our first home a bit younger than our children’s generation, but that’s because we were prepared to take that little flat on the outskirts of town, not get the latest furniture, use hand-me-downs for a fair while, and pay that thing off.
There was a different attitude to home ownership then. We wrote a report on this recently and said many in the Generation Y category expect to start their home life in the manner in which they’ve seen their parents finish their home life, in a nice home in a nice part of town. That’s not how it used to be and it’s not always possible.
Kevin: Fascinating. I know you’ve done a lot of work, too, on the wealth of Australians, and I know that we quite often talk about how the older generation have built their wealth on housing. You’ve had a look at this. Can you give us some stats on what you found out?
Mark: That’s right. The Baby Boomers have done very well, and that’s because they did follow that traditional Aussie dream of home ownership. It was a bit more affordable, as we’ve said, for them, but it’s a home ownership and paying down their mortgage has the extra benefit, for wealth purposes, of forcing one to save and to pay down that debt.
The downside for Generation Y is that because homes are harder to buy, they’re not buying those homes, but they’re not investing that money that otherwise would go into a home into some other appreciating assets – shares, etc. – but rather, renting and then with a bit more of that cash that they have available, spending that money on lifestyle pursuits, travel, and the like, which is great for the lifestyle but doesn’t create a nest egg for them.
Subsequently, we have the Baby Boomers who are a quarter of the population earning 53% of Australia’s national private wealth – more than half owned by one quarter – whereas the Generation Y, 15% of the population owns 7% of the national wealthy. Their economic footprint is just half of their demographic one. Now, they have a lot of wealth accumulating years to go, but they are further behind where their parents were at the same age.
Kevin: It’s reflecting priorities, I think, isn’t it? I know in my generation, getting the house was the most important thing. It was bred into us. You have to get that first house, then hold onto it and build your wealth that way. I’ve spoken to a lot of young people who say, “I think I’d much rather travel. I’d much rather have a little bit of flexibility about what I do.” To them, it doesn’t seem to be as important, Mark.
Mark: It doesn’t, and it is a generation more focused on the journey than the destination, a bit more living for the now. There are some great benefits to that: the life experience and the travel. That’s something to be appreciated. The study that they’re investing in, also, is going to set them up well, but it can create and delay the financial challenge of the future because it’s not getting easier to own.
If we look at Generation Y, they’re a high-income-earning generation with a low net wealth: income rich, asset poor. The average Generation Y household annually is bringing in $113,000. That’s some pretty good money coming in, and that would be enough to get hold of some sort of property, maybe not to live in – it might not be where they want to live, but at least getting a foothold.
But there does seem to be a bit of a negative sentiment that “Oh, it’s impossible to own a home; I’ll just be a lifelong renter,” and that can create a vicious cycle of non-gain in wealth accumulation.
Kevin: It’s almost like a resignation, isn’t it? It’s like “I’m just resigned to the fact that I’ll never own a house now, so let’s just get on with life.”
Before I let you go, I’ve certainly held my average up. I think just doing some quick calculations, I reckon we’ve been in at least 20 houses. What about you?
Mark: I’m probably halfway through that lifecycle. I’m probably up to about seven or eight. I’m probably slightly above the average, as well, in that regard. I’m probably part of that era where there’s just a lot of churn.
Kevin: I think in my job, too, in radio, we tended to move around quite a lot. I think in the early days when we first got married, we were actually moving quite a lot. Anyway, that’s just the way it goes.
Mark, it’s great talking to you. Thank you so much for your time. Mark McCrindle has been my guest, and that website again is McCrindle.com.au. Thanks, Mark.
Mark: Thanks, Kevin. I appreciate it.