Young Australians, eager to stand on their own two feet, are facing the harsh reality of having to rely heavily on their parents to help them buy a home.
A survey of 1,006 people nationwide, conducted for non-bank lender State Custodians Home Loans, found one in three respondents who don’t own a home admit they’ll need some sort of parental assistance to get onto the property ladder.
Some 29 per cent of Gen Y aged 18 – 34 say they’re relying on their parents to either gift or lend them money towards the deposit whilst 26 per cent are waiting for some kind of parental inheritance to help them out.
A large 37 per cent of young non-home owners also say they’ll need to make difficult lifestyle choices, such as moving back in with mum and dad, to save enough money for a deposit.
More than one in five Gen X respondents aged 35 – 49 presumably well out of the nest, say they’d also have no hesitation asking their parents for a financial gift, loan, or inheritance, and 23 per cent would even consider moving back in with their aged folks.
And some are putting off having children
Aside from this renewed dependence on older parents, 20 per cent of Gen Y say they’d have to put plans to have their own children on hold to be able to come up with a deposit for a home.
“It’s expensive to live in Australia, especially if you’re in a capital city,” says State Custodians General Manager Joanna Pretty.
“Whilst everyone would agree it’s a good idea for adult children to be as financially independent as possible, the reality is more and more young people are simply not able to get ahead in property without some kind of financial assistance from their parents.”
Ms Pretty says whilst new financial year budgetary measures will help first home buyers a little, the reality of scraping together a deposit will still be challenging.
“Being able to salary sacrifice for a deposit from pre-tax pay and use voluntary superannuation contributions up to $30,000 towards a deposit on a home will provide some benefit for some buyers. However, across-the-board first home buyer grants would be far more helpful as far as a lump sum goes.”
Four in 10 respondents (39 per cent) say saving wages from their current job would realistically be the main way they will get the money together for a deposit, whilst 28 per say that money saved from a new, more highly-paid job would get them into property.
This is a tough challenge, considering that Australian wage growth is currently at a low.
The ABS reports that the Australian average annual wage is $78,832, and that the average first home buyer loan across all states to June 2016 was $335,000.
To come up with a 20 per cent loan of $67,000, a person on the median wage with an after-tax monthly pay packed of $4,434, would need to put aside $1,116 every month for five years.
That’s on top of what they’d be paying for rental costs and other expenses, and given that in some cities many loans would be much higher than the average.
“It is definitely tough to buy in metro areas these days, especially if you’re struggling to make ends meet on your current wage,” acknowledges Ms Pretty.
“The deposit requirements are significant, even if you’re an expert saver. Unfortunately buying your ‘forever home’ right off the bat is not always a feasible or quick option like it has been in the past.”
For those struggling to stump up a deposit, and tackle the property ladder Ms Pretty has this advice:
- Save as much as you possible can for a deposit. It takes sacrifice and real commitment.
- When you are first starting out it’s important to keep your mind open about the type of property that you choose to buy, and the area it’s in.
- Have a plan in mind to upgrade or move to other areas over time, as your budget allows and the property value increases.
- Consult experts to help you with your planning so you get to your dream home sooner
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.