The psychological effect of never owning your own home

Stefan Young is giving up on home ownership, for now. The 28-year-old says it’s too daunting watching prices constantly rise, so he’s using some of his savings to move to Europe instead.

“It worries me, but I’ve tried to not think about it,” the commercial electrician said. “I mean, obviously I’d be shattered if I never got to own my own home. It’s everyone’s goal. When I leave this earth, I want something to hand down to my kids.”

Arguments over the housing bubble aside, the reality of soaring property prices is all too real for those left worrying about their future housing options. And with research showing non-home owners will retire significantly poorer than those who do own their own property, the anxiety is taking an emotional toll on many.

Almost half of those recently surveyed by psychologist Elizabeth Neal, in conjunction with ME Bank, said they felt inadequate as a result of not owning a home. Of the 1000 non-homeowners polled, 43 per cent said they could not imagine feeling fulfilled without owning a home and 39 per cent said they felt they had nothing to look forward to.

Researcher Ms Neal said she was surprised the negativity was not even more severe among the group: “I expected it to be higher, given it is such a topic of discussion right now,” she said.

The worst sentiment came from Generation X, which Ms Neal said could be explained by the cohort having higher expectations of home ownership.

“For most Gen Xers who aren’t home owners there was an expectation they would be,” she said. “It was paired with expectations of what life as a grown-up would be like. But now many have to consider they may be excluded from the property market.”

This “procedural memory” about how the future would play out, she said, was tougher for Gen X, given generations before them had enjoyed a more stable housing market.

Many non-home owners – such as Mr Young – were resistant or avoided thinking about the future. “And that’s the natural psychological way of dealing with a thing you don’t have any control over, is to avoid having to confront it,” Ms Neal said.

For many Gen Y or Gen Zs, the issue of being locked out of the housing market is coupled with a declining broader picture of mental health.

RMIT housing lecturer Andrea Sharam said that, when discussing the topic with students, she and her colleagues were acutely aware of the language they used and the impact it had.

“We are really well aware when teaching undergrads about housing affordability of the shock of what they’re learning about,” Dr Sharam said.

“People feel this way because [home ownership] has been the norm and it has been the norm because previous government policy has ensured that.”

After World War II, Dr Sharam said, cheap housing loans issued by the government, coupled with low interest rates, enabled many people to get into home ownership that would otherwise have not been able to afford.

“It set the basis for that historical level of home ownership that we’ve had … but it’s shifted because of housing price inflation,” Dr Sharam said.

For those young people whose parents don’t own their own home, the issue of the intergenerational wealth divide also comes into play.

“It’s likely [those that don’t own a property] do not have much other wealth, and if they have superannuation they’ll need to use that for their own welfare as they age,” Dr Sharam said.

“Therefore there will not be an inheritance for those children. They’ll need to have high incomes themselves and, what we know is, for families who don’t have a lot of wealth and don’t have high incomes, that perpetuates. So their children do not become high-income earners. That’s the problem: poverty is intergenerational as well.”

ME head of home loans, Patrick Nolan, said that, despite affordability pressures, the home ownership remains embedded in many Australians’ mindset.

“The unfortunate reality is house prices have more than doubled in the past 15 years … particularly due to high investor demand driven by generous tax breaks and low [interest] rates,” he said.

For people like Mr Young, a trip to Europe can distract from the problem short-term, but Australia’s housing affordability issue doesn’t go away. “It’s always in the back of my mind,” Mr Young said.