Gen Y give up on home-owning dream: Veda
Credit reporting bureau Veda is warning that a new generation of young people, dubbed ''property orphans'', may be destined to be renters for life.
New information from the Australasian analytics company suggests Generation Y, defined as those aged under 28, have rapidly declining prospects of owning a home.
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It has found that younger New Zealanders are applying for fewer mortgages, and instead borrowing up a storm on the likes of personal loans and credit cards.
Gen Y's mortgage inquiries were down by almost a third in the period of June to August, compared with the same time last year.
At the same time, personal loan and credit card inquiries grew strongly, up 12.1 per cent and 19.7 per cent respectively.
John Roberts, managing director of Veda New Zealand and International, said the group might be destined to be "renters for life".
"Gen Y may be showing a similar pattern to that of baby boomers prior to the 1987 downturn, when consumer spending was fuelled by unsecured borrowing," he said.
"It looks like Gen Y is seeking to borrow for purchase on consumer items or travel, and has given up, at least for the meantime, a desire for home ownership which may appear unattainable.''
He suggested that four consecutive hikes to official interest rates combined with the Reserve Bank's loan-to-value ratio (LVR) restrictions could be to blame, along with Auckland's spiralling property prices.
While younger New Zealanders have been hit hardest, the changes are taking place across the board.
Veda's mortgage inquiry volumes have now fallen for 11 months in a row.
Across all age groups, inquiries were down by 30 per cent in August compared to August last year and down 13.7 per cent for the three months to August.
Veda said that was the largest drop in inquiries seen since the LVR restrictions were first introduced in October last year.
The credit bureau's statistics provide further proof that the Reserve Bank's rules were having their desired effect of cooling the mortgage market and slowing the ascent of house prices.
The central bank's LVR statistics for August will be released tomorrow.
The bank's most recent numbers showed the volume of riskier loans had started to bounce back from the initial clampdown.
Banks collectively wrote $369 million of high-LVR loans in July, a figure which has more than doubled from a low of $147m in January.