Young adults are increasingly becoming "property orphans" by living it up with travel and shopping rather than saving for a deposit on a house, new data shows.
The decline in home ownership among Generation Y -- aged about 28 and younger -- could be due to the Reserve Bank's loan to value ratio (LVR) restrictions and four successive rises in the official cash rate, which have flowed through to retail interest rates on mortgages, data analytics company Veda says.
Younger New Zealanders were no longer applying for mortgages at the rate seen in previous years, yet they had increased their borrowing through personal loans and credit cards, which indicated a shift in their credit habits, Veda New Zealand and International managing director John Roberts said.
"They are property orphans because their behaviour suggests they may be unable to save the 20 per cent deposit required under the Reserve Bank of New Zealand LVR restrictions and not helped by Auckland's spiralling property prices," Mr Roberts 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.
"They might be destined to be renters for life which is likely to have an impact on net savings for this group in New Zealand in years to come."
Veda's data on all mortgage inquiries to August 31 showed 11 months of decreasing mortgage inquiry volumes this year.
Across all age groups, inquiries were down by 30.02 per cent last month compared with August last year, and down 13.74 per cent for the three months to August compared with the same period last year.
This was the largest drop in mortgage inquiries since LVR restrictions were first introduced in October 2013, Mr Roberts said.
In contrast, Gen Y's personal loan and credit card inquiries for the period were strong.
The rate of increase for personal loan inquiries from Gen Y in the August quarter, compared with the same period last year, was 12.10 per cent.
The rate of increase of credit card inquiries by Gen Y in the August quarter was 19.66 per cent compared with the same period last year.
"Potentially this could indicate a major structural change to the New Zealand economy as has played out in other jurisdictions such as Europe," Mr Roberts said.
"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."