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Generational divide: Who had it harder to buy a home?

It’s the perennial question when it comes to housing affordability in Australia.

Composite image of a Generation Z couple standing in front of their home, Australian money, and a Baby Boomer gardening.
Generation Z face skyrocketing home prices but Baby Boomers had to deal with record-high interest rates. (Source: Getty)

As interest rates have risen in 2022 and 2023, there has been some discussion in the media about whether Baby Boomers actually had it harder to buy a home because rates were much higher in the past.

Other stories have countered that, in fact, Millennials and Gen Z have it much harder because of the rise in home prices, and low wage growth.

Comparing affordability across generations is always a difficult task. One crucial reason is that a generation includes people across a range of ages who earn more as they get older.


To account for this, we’ve taken 20-60 as the age bracket for when each generation is most likely to have paid a mortgage. This provides a range of incomes and home prices to average out over a person’s life.

Another problem is that the value of money changes over time. For this, we have analysed interest rates, home prices and incomes - adjusted for inflation - to work out which generation has had it the worst.

So, what counts as having it the worst?

One measure is how much of the average annual salary it takes to buy a home. The first step to buying a home is to save for a deposit. On this measure, Gen Z currently has it the worst. That’s been true since 2016, when the oldest in Gen Z turned 20, paid up to 11 times their average salary for the total cost of a mortgage for a home, and 139 per cent of their average annual salary for a 20 per cent deposit.

Millennials are not far behind in the struggle. Since 2000, when the oldest Millennials turned 20, they have required 11 times the average salary for the full cost of a mortgage over 30 years, and 122 per cent of their salary for a deposit. This is in contrast to Gen X who, since 1980, required 11 times the average salary for a mortgage, but only 94 per cent of a year's salary for a deposit.

However, this is all in stark contrast to Baby Boomers. From 1959 to 1989, they only had to shell out 4 times the average annual salary to pay off their mortgages and 35 per cent of their annual salary to save for a deposit

‘Interest rates were higher in our day’

It is true that interest rates were much higher for Baby Boomers and Gen X than they currently are for Millennials and Gen Y. For instance, the standard variable interest rate hit 17 per cent in 1989-1990. This means Baby Boomers faced an average interest rate of 9.2 per cent. This is the highest among all the generations, with Gen X facing a 9.1 per cent interest rate, Millennials paying 6.5 per cent and Gen Z paying 5.3 per cent.

Despite facing lower interest rates compared to Baby Boomers, the main contributor to Gen Z and Millennials needing larger salaries to buy a home is the rise in house prices, which has offset lower interest rates. The average Gen X, Millennial and Gen Z have had to pay, or will pay, far more in interest on their home loans due to the increase in home prices. Gen X were in the worst position, having to pay seven times their average salary in interest over the life of their home loan. Millennials and Gen Z face paying six times their average salary in interest. Baby Boomers, on the other hand, only had to pay three times their annual salary in interest charges.

‘Our wages were worth less in our day’

Although inflation rapidly increased in 2022, it was higher in the past. For instance, CPI inflation hit 17.7 per cent in the March quarter of 1975. However, even adjusting for inflation, Baby Boomers had it easier than subsequent generations. Baby Boomers required an annual salary of $15,290, on average, to pay a home loan, equivalent to $98,299 in today's dollars.

Interestingly, when adjusted for inflation Gen X came out the worst, having had to earn $138,217 in today's dollars to afford a home loan, which is the highest among all the generations. Gen Z comes in second, having to earn $120,541 in inflation-adjusted dollars since 2015 to afford a home loan. Millennials have it slightly easier, requiring $112,850 in inflation-adjusted dollars.

So does Gen X have a valid claim for having the steepest path to home ownership? Not quite.

The value of incomes also changes over time. When incomes are adjusted for inflation, we find that Millennials and Gen Z have the worst inflation-adjusted average salaries - $91,493 and $97,156, respectively. In today’s dollars, Baby Boomers and Gen X enjoyed incomes of $214,002 and $112,690, respectively. This is why, when adjusted for inflation, Gen Z, Millennials and Gen X are all paying 18 times their annual salary for a mortgage, compared to only seven times for Baby Boomers.

How did we get here?

Why have Gen Z, Millennials and Gen X found it so hard to afford a home compared to Baby Boomers?

On the demand side of the equation, net overseas migration has doubled since 2007, from roughly 100,000 new migrants per year to 200,000 per year. These are families that require homes.

On the supply side, the number of new houses completed per year has largely remained between 20,000 and 30,000 since the 1970s. Despite strong growth in unit and townhouse construction after 2014, this trend reversed in the years leading up to 2020. The underlying causes of these trends are complex, with economists citing excessive regulation of zoning, but also the over-reliance on private property developers to supply housing stock.

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