Wednesday, September 1, 2010

House, marriage and children - in their own sweet time

The media leap on any suggestion of social change. At present there's talk of younger people being happy to keep renting rather than buy their own homes. Before that there was talk of career women not wanting children. And before that, we kept hearing about young people not bothering to get married, even after the kids had started arriving.

I guess there's some truth in all these stories. Perhaps the truth is that, whereas in times past just about everybody conformed to expected behaviour, these days a minority rebels. Or perhaps it's just that these days more young adults are turning to the conventional response later, rather than not at all.

But whatever the explanation, don't let an excitable media convince you the world is changing beyond recognition. Human nature's a bit more resistant. Things change, but not dramatically.

According to a new report from social researchers Ipsos Mackay, almost everyone in their 20s to mid-30s who participated in their group discussions wanted the "trifecta" of marriage, house and children. What's changed is they're a lot more flexible about the order in which they come and how long they take.

Young adults still want to see the world before they settle down. Perhaps these days it's easier for more of them to do so and they're inclined to make several overseas visits rather than just one extended working holiday. (Sometimes I wonder whether declining oil supply and concerns about greenhouse gas emissions will one day cause us to look back with longing on a golden age of international travel.)

One change is that, when young adults start to settle down, buying a property is often the highest priority. They're "keen to get started for fear of missing out," according to the report. So much so that some of them, unable to afford their own home, nonetheless seek a foothold in the market by buying an apartment and renting it out.

The fear of missing out - of delaying until the point where prices become unaffordable - is the very mentality that keeps prices rising, of course. It's a self-fulfilling prophecy.

The surprising thing is many years of strongly rising house prices seem to have done so little to dull the home-owning ardour of the next generation. They repeat their parents' conviction that rent is "dead money" and mortgage payments are no higher than rent (not really true).

They see property as a good investment and - in what may be an advance on their parents - a means of forced saving. Just so. Until the advent of compulsory superannuation, it had long been the case the main way Australians saved was to borrow a huge sum on their mortgage and spend the next 25 years paying it back.

Even where people continue to live in that home in retirement rather than trading down to a smaller and cheaper one, owning your home makes it a lot easier to live on the age pension.

Why is the next generation so keen to own the roof over its head? Because it creates "a sense of security and pride in ownership".

Just so. We all have an urge to own. I have a holiday house I love, but only rent. It took my head years to convince my heart I was getting the best of all worlds since the place was almost always available when I wanted it and I had no responsibility for the upkeep of the place. If the grass needs cutting when I roll up for a break, I experience not the slightest twinge of conscience.

The report says young people "invariably" rely on support from family. That's something all parents need to understand. The rise in house prices represents a transfer of wealth from the younger generation to the older. At the level of the individual, that wealth needs to be recycled from old to young if the young aren't to be dispossessed.

At the collective level, should sufficient recycling fail to occur, house prices would slip (which might be no bad thing). In the end, this generation sells its homes to the next. If the next generation can't stump up the money, prices will fall until they can. The remarkable thing is, so great is our continuing desire to own our homes that young couples keep finding the money from somewhere. One way they do it is by allowing housing costs to take up a bigger share of their weekly budgets than in earlier times. Another way is for wives to keep working and delay the start of their families.

There's the rub. According to the report, most young people accept the impossibility of buying property on one income. In theory, having two incomes makes it possible for couples to enjoy a much higher standard of living. In practice, the presence of two incomes, with their greater purchasing power, has simply bid up the price of houses. What began as an advantage to those couples able to command two incomes has become a disadvantage to those unable or unwilling to have the wife go out to work.

It seems to remain the case that most young people marry - eventually. What's changed is the variability in when in the process of acquiring a house and children marriage occurs.

Big weddings are fashionable and seem to have become more expensive - with the average cost said to exceed $35,000 - but the couple is now likely to pick up more of the tab. With prices like that, it's not hard to see it postponed to a more financially convenient time.

So marriage is no longer a major point of transition for many young people. On the other hand, the young adults covered in the report found having kids radically transformed their lifestyle. Now who among us oldies would ever have imaged that?