The Unbearable Logic of the Gen Y Real Estate Market


Last month the General Manager of Australian Property Monitors, Michael McNamara, argued that inner Sydney’s perpetually escalating rents were a result of Generation Y ‘snobbing’ a mortgage in the ‘cultural wastelands of Sydney’s suburbia’ and instead pursuing sought after inner city and eastern suburbs real estate hotspots.

The story traded on predictable generational stereotypes of Gen Y as a group not willing to make sacrifices. Dare I suggest, from my bohemian enclave of Surry Hills, that what McNamara calls the ‘vacuous œI want it now  mindset’ of today’s twenty-somethings in fact demonstrates a sophisticated approach to microeconomic modelling.


Allow me to explain. In choosing to reside in the more popular (and, accordingly, expensive) inner suburbs, Gen Y is putting a price on cultural diversity, proximity to pubs, intellectual stimulation, the human and financial costs of long commutes, and vibrant artistic communities. By incorporating these factors into their personal economics not simply ‘Give me mortgage or Give me Death’ Gen Y is demonstrating economic reasoning skills that are attuned to deliver their desired living standards.

The sophistication of Gen Y’s housing choices is elevated even further when one interrogates the broad trends in the real estate preferences of their elders.

Spiritually and emotionally overstretched by sprawling suburban metropolises, baby boomers are jumping on the seachanger bandwagon. Chasing peaceful ocean vistas in small coastal townships, these amenity immigrants often overlook the lack of amenities available in their new location.

Accustomed to the developed infrastructure networks of suburban Sydney and Melbourne, these baby boomers start psychologically haemorrhaging when the local café doesn’t make the soy lattes like the Mosman Gloria Jeans does. If ever there is an example of the ‘I want it now mindset’ obfuscating economic rationality, the insistence of instant life style transformation indicated by the baby boomer seachange trend is it.

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Economically speaking, the boomer seachange is ironic because their financial profile opens up a wider spectrum of choices in the property market, yet they select areas that won’t have the infrastructure demanded by well-heeled retirees, until they have more than one foot in the grave.

Baby Boomer Real Estate Economics Modelling: 0 vs Gen Y Real Estate Economic Modelling: 1.

Yet it is Gen X real estate economics that really crumbles into a flickering wasteland of empty home ownership dreams, when compared to the advanced calculus deployed by Gen Y. Sailing beyond the idealism of their 20s into the distorting social pressures of haphazard mortgage chasing, Gen X economics reverberate the simplistic notion that financial sacrifices made in obtaining a mortgage are a guaranteed future windfall. It’s elementary classical economics where lost cultural development, martial disintegration and psychological mortgage belt stress are costs neither internalised into accounting ledgers nor ascribed adequate value.

They are undeterred by sub-prime trying to tear the US economy a new orifice, or by the hordes of mortgage-stressed families evicted by predatory backyard financiers hiding behind solicitor lenders across Sydney’s western suburbs. For Gen X it is full steam ahead in claiming their rightful access to the Australian home ownership dream, regardless of their capacity to service exorbitant and grossly inflated interest repayments.

Gen X real estate economics resembles that of a drug runner trying to make the transition to drug dealer. The mentality pervading Gen X economic modelling is essentially: ‘I don’t give a shit where, when, how or why, just deal me into the game.’ Home ownership becomes the magical panacea to financial security and the road to becoming Mr BIG.

Far from real estate market pariahs, the inherent economic logic of Gen Y rental decisions is so far holding resilient to the senseless Gen X push to join the legion of home loan defaulters. Gen X’s attitude to real estate poses a significant threat to Australia’s economy, as demonstrated by the atomic fallout caused by sub-prime in the US economy.

Gen X Real Estate Economics Modelling: -1 vs Gen Y Real Estate Economic Modelling: 2

Gen Y’s refusal to be buried amidst McMansions, RSL Clubs and suburban shopping malls is no different to the Gen X and Boomer rebellions against the social constraints that bound their parents. When Gen Y does pursue home ownership, it will be done in a manner that mitigates the necessary sacrifices and minimises mortgage encroachment upon cultural aspirations. A lesson that Baby Boomers and Gen X could do well to learn.

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