Generation Y and Housing Affordability

Monday, October 24, 2016


As Australia’s leading social researchers, the senior research team at McCrindle are actively involved in media commentary. Last week our Principal, Mark McCrindle and Team Leader of Communications, Ashley McKenzie were featured in the media about Generation Y and their ability to access the housing market in Sydney.

Generation Y are today’s 22 – 36 year olds, and make up 22% of the Australian population (5.22 million). They also make up the largest cohort in the current workforce (34%). Gen Y’s are comprised of today’s parents, senior leaders, influencers, and increasingly wealth accumulators. With 1 in 3 being university educated (compared to 1 in 5 Baby Boomers), they have grown up in shifting times and are digital in nature, global in outlook and are living in accelerated demographic times.

While Generation Y are often accused of living a lavish lifestyle, which supposedly locks them out of the property market, it is important to remember that traditional expense categories such as food, transport, health and housing costs are higher for younger people today than that experienced by their parents at the same age. A generation ago the average house price was 5 times annual average earnings while today the average house price is 13 times the average annual full-time earnings.

Here is a quick snapshot of last week’s media coverage:


Housing Affordability Debate

"From the Baby Boomer perspective, they worked hard, they earned what they had but I can also see the Gen Y perspective. The reality is that it's a lot harder to buy a home, the costs have gone up. Gen Y do have to pay off the debt of their degree and there are new categories of spend; technology, internet and phone, costs that their parents didn’t have."  


Parental help becoming essential for young people trying to buy property

"Ms McKenzie, who works for social researcher Mark McCrindle, said borrowing from parents was becoming Sydney’s “new normal”. “Baby Boomers control about 50 per cent of the nation’s wealth so it makes sense young people look to their parents for help,” she said." 












For any media enquiries please email us at info@mccrindle.com.au, or call our offices on +61 2 8824 3422. To arrange a media interview or if you are a journalist and would like to receive our media updates, please email kim@mccrindle.com.au.

Income and wealth distribution by state

Monday, September 12, 2016

High wealth, high income

What are the high wealth, high income states? Western Australia is leading in terms of both income and wealth, with $133,224 and $952,500 respectively, which is well above the average household annual gross income of $107,276 and average household net worth of $809,900.

However, over the last year particularly, the impact of the mining slowdown has affected earnings and also wealth. The reliance on the mining sector and the fluctuation of income and wealth based on the fortunes of this one sector are highlighted in the fact that between 2012 and 2014, the household incomes of those in Western Australia rose by 21% which was almost double that seen in the leading east coast state of New South Wales, and the wealth in this 2 year period increased by 24%, again almost double on what we saw from the best performing east coast states.

Top performing states

New South Wales is the most consistent performer in wealth and income, and the only other state to have both income and wealth about the national average (12% on income and 13% on wealth). It has a stable economy, with the largest infrastructure investments in the nation, a broad base of industries and consequently solid forward forecasts.

The Northern Territory, like Western Australia has been fluctuating, and while it has average income above the national average, its wealth is below the national average. Queensland, while improving in both income and wealth is below the national average on both as well. And Victoria while seeing solid gains in both income and wealth, with wealth largely due to the housing market above the national average, its income has still not quite reached the national average.

Worst performing states

The worst performing states are Tasmania, with incomes 26% below the national income and wealth average, as well as South Australia which is 19% below the average household income and 20% below the national net wealth.

While household income gains have been low in some states (a total of 6% gain since 2012 in South Australia, Tasmania and the Australian Capital Territory over the last 2 years), at least all of the states have had an increase in incomes, but such has been the change in property prices and the rise in living costs, the Northern Territory, South Australia, Tasmania and the Australian Capital Territory have all seen a slight fall in average household wealth since 2012.

The New Australian Dream

Thursday, September 01, 2016


Owning your own four bedroom house on a decent block of land with a big backyard and outdoor swimming pool used to be the quintessential 'Great Australian Dream'. But with rising property prices and increased living costs, that dream is being redefined.

what is the Average Australian Profile?

The average full time annual income in Australia is $80,000, which is bumped up a bit because of high income earners. Even though we are living longer now than a generation ago, the average retirement age is little changed, at 61.5 years.

The cost of housing is up with average rent prices per week at $485/week and the average house price (capital city) is $765,730. In Melbourne it is well above this and in Sydney it is around $1 million. This is where the challenge is for Australians: 40 years ago the average house price was around 5 time’s average earnings and now you can see it is almost 10 times the average annual fulltime earnings.

Other than affordability, what else are Aussies looking for?

Lifestyle is key. People are opting to live in higher density areas for the sake of convenience and location- within close proximity to transport, restaurants – the café culture as it has been called. Our Urban Living Index shows a strong correlation between the most urban/densified suburbs and those with the highest liability ratings.

Australians are opting for a lifestyle of Minimalism - we are 'decluttering' our lives and putting more value on the intangibles like travel. Generation Y aren’t opting for a big home with garages to store all their stuff but more of a focus on the easy-livability of apartment living. Indeed many baby boomers are downsizing from their larger homes in the suburbs to this style of living too.

Renting, as opposed to buying, what some of the benefits?

The ability to change locations easily is well regarded – the average Australian renter stays just 1.8 years per home. Our research shows that 1 in 3 renters are actually 'choice renters' and they choose to rent for lifestyle reasons, not primarily for affordability reasons. These choice renters are twice more likely to be living in medium and high density housing than the average Australian and they are almost 10 years younger than the average Australian. The ability to upsize and downsize easily and the flexibility to travel for extended periods of time is a driver for them. ‘Rentvesting’ is also becoming a ‘thing’. This is where people choose to rent in an area they like, but buy somewhere more affordable and use this as an investment

Generation Y are struggling to attain the Great Australian Dream – are they going to be ok?

There is a challenge emerging of "generational inequity" as shown by this infographic:

Gen Y’s have the least wealth of the working generations and their proportion of Australia’s wealth is less than half their demographic share, while the Baby Boomers who are a quarter of the population, own more than half of Australia’s wealth. (More information on this topic can be found here)

This is why Gen Y is reinventing the Aussie Dream and while they do still like the idea of owning something of their own, it is not just the big home with the back yard in the suburbs. But many in this generation will be absolutely fine thanks to the massive intergenerational wealth transfer set to happen in the next 20 years as those aged over 65 transfer much of their total wealth of $2.5 trillion.

Wealth and Income Distribution State V State

Monday, July 25, 2016


Australia has long been considered the land of the middle class, but in recent years the gap has been widening between the rich and the poor. When it comes to the battle of the states, which corner of Australia scores the highest and the lowest on the income and wealth report? Will the Baby Boomer generation continue their stronghold on our national wealth?

Is Australia still the land of the middle class?

It is hanging in there, but it’s under pressure. We have seen some hollowing out in the middle of the earnings and a bit of spread to either end. The average annual household earnings are around $107,000 however the lowest fifth of households earn 20% of this while the top fifth average almost three times this. That means that the top fifth of households are taking home about 12 times what the bottom fifth of households are earning.

Most Aussies have their wealth tied up in their homes, how does ownership compare with the top, middle and lower classes?

The average wealth (if you liquidate everything and pay off all your debts, what are you left with) is about $800,000. The bottom 1 in 5 have a net worth of just $35,000, the top 20% of all household have a net worth of about $2,500,000. That means that the top fifth of households have about 62% of Australia’s wealth, and the bottom fifth take less than 1% of Australia’s national private wealth. So that's a big difference in wealth across these households.

Which states are best and worst performers when we are looking just at income?

The mining boom in WA has really done a great thing over there and so they are leading the earnings chart, with the ACT not too far behind with public servant wages doing pretty well. At the bottom of the tree you have Tasmania, earning about $50,000 less per annum, per household, than what we have in the west.

Australia's Household Income and Wealth Distribution

Tuesday, June 21, 2016

Land of the middle class?

Australia has long been labelled the land of the middle class but the latest analysis of the Australian Bureau of Statistics wealth and income data shows that this is less the case today.

Household income by quintiles

This infographic of annual household income by quintiles (20% categories, each comprising around 2 million of Australia’s 10 million households) shows the spread of total earnings. While the average household annually earns just over $107,000, the top 1 in 5 earns more than twice this (exceeding $260,000) while the bottom 1 in 5 takes home around one-fifth of this (a little over $22,000). This means that while the bottom fifth of households get 4% of all income, the top fifth get almost half of all earnings (49%).

Highest fifth have incomes 12 times the lowest fifth

The top quintile in gross terms earn almost as much as the other 80% of households combined. In ratio form, the highest quintile households average 12 times the average bottom quintile income.

Gini coefficient shows growing income divides

The Gini coefficient is a measure of income spread, with 0 being perfect equality and 1 being total inequality. The latest data shows that it is now at its highest (most unequal) level ever at 0.446 compared to 0.417 in the mid 1990’s. In the 20 years since, average household gross incomes have increased 60% from $66,196 to $107,276 today while over the same period, incomes of the top 1 in 5 households (highest quintile) have increased by 74% from $149,552 to $260,104.

Highest earners also had highest income growth

In the decade since 2005-06, most of the household categories have seen income increases of 18-19% with an average increase of 24% ($20,956 increase from $86,320 to the current $107,276) while the highest quintile has enjoyed income increases of 30% ($60,528 higher than a decade ago, up from $199,576 to $260,104).

Household wealth by quintile

Accumulated earnings are best represented by net wealth, and this is where the changing economic landscape is even more dramatically presented. While the average Australian household has net wealth of $809,900, the highest quintile household on average has a net wealth more than three times this ($2,514,400) while the lowest quintile household wealth is just a fraction of this (4% of the average wealth, or $35,500). The lowest 20% of Australian households own less than 1% (0.9%) of the national private wealth while the highest 20% own 62% of the national private wealth.

Wealthiest 20% own 71 times that of the lowest 20%

The wealth of the highest quintile households on average is 71 times that of the lowest quintile households. While the average Australian household has seen wealth increase by 6% in the last 2 years (an increase of $45,400), the highest fifth of households have averaged increases of 8% (an increase of $189,500). Only upon reaching the fourth of five quintiles does the average household net wealth ($830,600) exceed the average house price ($720,000), while the highest quintile households on average have a net worth exceeding 3 average Australian homes.

Wealthy have net worth many multiples of income

The net wealth of the lowest quintile is just 1.6 times annual income, for the average household wealth is 7.5 times incomes while for the highest quintile, their wealth is almost 10 their average annual income, and more than 23 times the average Australian household annual income.

Australia’s Generations by Wealth and Income

Wednesday, June 01, 2016

This infographic is based on analysis of the ABS Household Income and Wealth data released in late 2015 and 2013. It gives a picture of how both income and wealth is distributed across the generations of households in Australia and how it has been changing.

Generation Y: High incomes, low wealth

While Generation Y aged 25 to 34 are income rich, earning in gross household terms $113,152 per annum, their net worth is modest, at $268,800. As they enter their mid-30’s, they are getting closer to their key earnings years however such has been the low wages growth over the last two years, their household incomes have only increased by $5,356, or 5% since 2013. While Gen Y households on average earn more per annum than the older Boomers aged 55-64 who are rapidly easing out of their full-time working roles, these Boomers managed income increases almost three times that of the younger generation over this period ($14,040). This 14% increase in annual household incomes came about because the older Boomers were reliant not on wages growth but investment income which has seen solid increases over the last two years.

Generation Stagnation

It is ironic, and unfortunate that the emerging generation of wealth accumulators, moving up the career ladder have seen far smaller income increases (amounts just keeping up with inflation) than the generations that are easing out of employment or having ceased employment. Indeed, the generation aged 65+ managed much higher income increases (16%) than the younger working age Gen Y’s.

Wealth compared across the generations

The generational financial inequities are even more pronounced when analysing net wealth by generational cohort. While Gen Y have a household net worth of $268,800, it is less than half that of the Gen Xers who are just a decade older. The highest net worth generation in Australia are the Boomers aged 55-64 who not only have a net wealth almost 5 times that of the generation of their children (Gen Y) but they still have a decade or more of earnings and wealth accumulating ahead of them.

The $1 million households

While Gen Y have seen a wealth increase of 9% since 2012 ($21,647), the mid 50’s Boomers have seen a 14% wealth increase ($153,335) with their wealth rising since 2012 from $1,086,365 to $1,239,700. Therefore, not only does the average Australian household aged over 55 have a net worth exceeding $1 million, but, due largely to rising property prices over the last few years, it is also seeing the fastest wealth increases. When the demographic size of each generation is compared against their corresponding economic share, the differences are stark. Australians aged 25 to 34 are equal in size to the Over 65’s at 3.6 million, or 15% of the total population of 24 million. However, the net wealth of Generation Y is well below this population share at just 7% of the national private wealth compared to the Builders generation who have a share of 26%, almost twice their demographic proportion.

The quarter who own more than half

In total the Baby Boomers (45 to 64) are a quarter of the population (25%) but own more than half of Australia’s national wealth (53%). Their economic footprint is twice as large as their demographic footprint. While the Gen Y’s have decades of wealth accumulating ahead of them which will grow their net worth footprint, it is unlikely that Australia will ever see the likes of today’s Boomers again where a quarter own more than half. The Boomers have been the beneficiaries of a near 50-year economic miracle, and they are unlikely to ease out of this accumulating any time soon.

The $3 trillion wealth transfer

But there is some hope for the emerging generations who have stagnated in wealth and have been priced out of property. The households of Australians aged 55+ currently own a combined $2.8 trillion and over the next two decades will pass on much of this. By the time they move from the growing to the spending side of this accumulation, it will have exceeded the $3 trillion level. Therefore, the decades ahead will see the biggest intergenerational wealth transfer in Australia’s history and many of the younger generations will be the main beneficiaries.

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