Gen Y refusing to leverage into asset bubble

The Melbourne Herald Sun has reported on research from RateCity, showing in the 12 months to July, 40,000 fewer first home buyers entered the property market compared to the previous 12 months. This has seen mortgage lending fall some $11 billion dollars, at a time when housing costs were approximately the same.

Earlier this year, influential businessman Dick Smith told the weekend Australian Financial Review “I suggest to people who have big borrowings on a house, it’s all a Ponzi scheme”. A Ponzi scheme provides returns to investors from money paid by subsequent investors, i.e. the property market requires new entrants (‘Greater Fools’) to pay more for housing than the previous person, so the scheme can keep operating (house prices continue to rise).

As Ponzi schemes don’t make actual real profits, and continually requires new entrants, they normally collapse when there are fewer newer players entering the scheme.

» First-home buyers drop in past year – Herald Sun, 27th September 2011.


  1. Not refusing, more likely cannot afford to, can hardly pay the rent, how do they expect first home buyers to take out a mortgage then with those associated costs over 30 years with little or no oppourtunity to make a dent in that mortgage for 10 to 15 years of that 30 year loan? Financial suicide.

  2. Agree. I am 30 so on the edge of gen Y. My friends who have brought houses have all had a substantial leg up from parents, either in deposit, shared mortgage or living in a parent owned dwelling rent free. So if your folks can’t do that it is impossible to get in; and with so many parents either unable to afford investment places for kids to live in, having lost money in super, or being laden with their own expensive property markets that well is drying up.

    For the rest of us I have a great job and my partner works full time but it is not enough, I have a HECS debt and pay about $200 per week, one young child (so a significant amount each week in child care etc) and after rent and bills there is little left. I am not complaining, it’s just the way it is; but I this is why I foresaw the property crash- when young double income couples earning decent money with a child and a HECS debt can’t afford to buy in the city or country it is surely unsustainable. We don’t want to burden our family with a huge mortgage that would mean financial stress weekly, or losing everything if over the course of a 30 year mortgage something unforeseen happened!

    At this point until housing is affordable we cannot even consider buying; and I would rather have another child or do post grad studies and increase my HECS debt and live in a cheapish (though still relatively over priced) house than have a mortgage – especially as I am also noticing a sustained increase in number of rental properties and rent discounting so we are looking forward to soon renting something better for proportionately less. Gen Y aren’t stupid.

  3. Ok a bunch of Gen Y are stupid, but our capacity to make the same stupid financial decisions as those who brought before us is diminishing 😉

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