One in three young people rely on their parents

One in three young people rely on their parents

Nearly one in three young people that don’t own a home are relying on assistance from parents to help them make the leap, Galaxy Research has revealed.

The research, conducted for non-bank lender State Custodians Home Loans and released on Wednesday (6 September), found that 29 per cent of Australians aged 18–34 who don’t own a home would need a loan or grant from parents to get a foot on the property ladder.

Further, 26 per cent of respondents were looking to some form of parental inheritance for assistance.

“While everyone would agree [that] 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,” said State Custodians general manager Joanna Pretty.

“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 [as part of the new housing affordability package] will provide some benefit for some buyers. However, across-the-board first home buyer (FHB) grants would be far more helpful as far as a lump sum goes.”

Thirty-seven per cent of young people that do not own property have said that they would need to move back in with parents to save enough for a deposit, while 20 per cent said they would need to postpone plans to have children in order to save a deposit.

However, it’s not just young Australians who look to their parents for financial help, the survey reported. Nearly a quarter (23 per cent) of respondents aged 35–49 would consider moving back in with their parents to save for a deposit, and more than 1 in 5 would “have no hesitation” asking their parents for financial help.

State Custodians said that it’s a “tough challenge” for FHBs to save using wages as Australian wage growth is stagnating. Accumulating savings from their current job was the main way 39 per cent of all respondents aimed to gather a deposit. Twenty-eight per cent of respondents were eyeing a better-paying job to help them save up a deposit.

“It is definitely tough to buy in metro areas these days, especially if you’re struggling to make ends meet on your current wage,” Ms Pretty said.

“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.”

Factoring in an average Australian salary of $78,832 and an average FHB loan of $335,000, State Custodians said that FHBs would need to put aside $1,116 of a $4,434 monthly pay packet every month for five years to save a 20 per cent deposit.

State Custodians noted that FHBs often also need to pay rent and living expenses while living in cities where larger loans are a necessity.

The parents’ bill? $65.3 billion

The Galaxy Research report echoes research released by Mozo on 5 September which found that Australian parents have spent $65.3 billion in helping young buyers enter the market.

According to the Mozo research, the “Bank of Mum and Dad” is the fifth-largest lender in the country and has lent more than ING ($42 billion), Suncorp Bank ($40 billion) and Bendigo Bank ($34 billion).

Mozo director Kirsty Lamont said: “It’s getting harder and harder for new buyers to enter the market.

“This has led to the rise of mum and dad as a lender — parents who are helping their kids to purchase a property by contributing to the deposit, helping to meet home loan repayments, or in some cases, even buying the property on their children’s behalf.”

Mozo pointed to a growing divide between the average house price and the average income as an exacerbating factor. The average house price in 1986 of $76,278 was 4.4 times the average income of $17,321. Conversely, in 2016 the average house price had reached $547,714, 6.9 times the average income of $78,832.

Twenty-nine per cent of parents help children buy a home. While the lending averages more than $64,000 per family, 67 per cent of parents don’t expect to be repaid.

Parents in NSW lend the most, around $88,250 per family, and Victorian parents lend around $63,000

Original article: