Yahoo Finance Devastating reality behind the bank of mum and dad
Australia’s property market is growing at its fastest pace in 32 years, and it’s forcing more buyers to turn to their parents for help.
Around one-in-three home buyers relied on their parents for financial support to get into the market, new research from Finder has revealed.
But for Australians who can’t rely on their families for support, this trend is of growing concern, the CEO of Indigenous financial prosperity organisation First Nations Foundation Phil Usher told Yahoo Finance.
And for Indigenous Australians, this sprinting property market is only contributing to challenges in closing the gap.
“$89,000 from the bank of mum and dad for your first home was the average amount in Australia,” Usher said.
That figure comes from Digital Finance Analytics research which also found that parental contributions have increased by some 20 per cent in the 12 months to March 2021, making the Bank of Mum and Dad a top 10 mortgage lender.
“For Aboriginal people - their parents don’t own a lot of homes so that’s just not there,” Usher said.
The rate of home ownership among Indigenous Australian households has increased from 34 per cent in 2006 to 38 per cent in 2016, however that’s still lower than the 66 per cent of non-Indigenous households that owned homes in 2016.
And in 2014-15, 29 per cent of Indigenous Australians were living in a home with major structural problems like big cracks or plumbing issues, according to the Australian Institute of Health and Welfare.
“That’s one part that they miss out, but the other thing is - I’ve seen this with my friends - a lot of my friends just walked into property because their parents went guarantor and they just had that sort of stability,” Usher said.
“But when their parents pass on and their parents have got a lot of property and assets they can pass on to the next generation, then that’s another boost as well.
“My parents are in debt, they won’t have a lot, and a lot of my friends are the same.”
That speaks to the broader issue of intergenerational transfers of wealth, Usher said.
While there is a growing Indigenous middle class, Usher said the big thing the pandemic highlighted was the poorer levels of savings among Indigenous Australians.
He said around 50 per cent didn’t have savings, and those that did often had less than a month’s worth.
First Nations Foundation research carried out with NAB and the Centre for Social Impact found that in the case of an emergency, two-in-five Indigenous Australians would be able to access $2,000.
For non-Indigenous people, that was four-in-five.
The solution lies within the community, Usher said.
Engaging with Indigenous Elders, stakeholders and buyers is absolutely essential, he said. But it needs to go beyond that to ensure that the communities affected by policies designed to create Indigenous prosperity are also the ones formulating the policies.
The answer is to partner with Aboriginal communities.
“[That] is the biggest thing that’s missing, what I find is that communities have their own answers. We just need the financial resources and the support to make that happen. That’s what Closing the Gap really misses.”
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