Bob Hawke was prime minister and university was free when Tracey Rao first got her foot on the property ladder in the late 1980s.
Tracey, who is now 61 years old, bought the two-bedroom apartment in Sydney’s Lane Cove for $80,000 at the time with her then-partner, with a deposit of $10,000.
Her interest rate was close to 18 per cent - which may sound crazy considering the pain Aussies are feeling right now with mortgage rates at an average of 6.70 per cent. But, despite this, Tracey thinks buying property is “definitely” tougher for young people today.
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Aimee Flores is a 32-year-old community worker currently saving up for her first home with her husband and is budgeting $700,000 for a two-bedroom apartment.
“The prices of houses are super expensive now and the climate is so different to what it was like even 10 years ago. The increased interest rates have also dramatically affected my generation's opportunity to buy a house,” Aimee told Yahoo Finance.
The average price of a home across Australia is now $747,424. In Sydney, the average price is even higher at $1,121,196.
Aimee’s $20,000 HECS debt is also something that weighs on the back of her mind, with a 7.1 per cent indexation applied to loans this year.
“Baby Boomers had free university education whereas my generation and generations after didn’t. We have HECS loans, which means we already owe money to the government before we even have an opportunity to save up to buy a home,” Aimee said.
So, what does the data say?
While Baby Boomers and Gen Xers had to pay higher average interest rates of more than 9 per cent, younger Aussies now face higher home prices compared to the average income.
Finder research supplied to Yahoo Finance shows Millennials and Gen Z are paying mortgages worth 12 times the average annual salary.
The journey towards home ownership also takes longer. Millennials need to save 130 per cent of their average salary for a 20 per cent deposit, while Gen Z now need 150 per cent of their average salary.
Gen Xers who bought property between 1980 and 2009 needed 11 times their average salary for the total cost of a mortgage and 90 per cent of their income for a deposit.
Baby Boomers, buying between 1959 and 1989, had to pay four times the average annual salary to pay off their mortgages and have 40 per cent of their income to afford a deposit.
Salaries have also shrunk
When adjusted for inflation, Finder found Gen Xers required the most income to afford the average home loan at $138,217. However, Gen Z aren’t too far behind at $129,809.
Millennials needed $119,101 to afford the average mortgage, while Baby Boomers needed an income of $98,299 in today’s dollars.
But the value of the average salary has also shrunk over time. Millennials are earning $91,493 per year on average adjusted for inflation, and Gen Z are set to earn $97,156 per year.
This is far behind Gen Xers who had average inflation-adjusted salaries of $112,690 per year, and Baby Boomers who Finder found had salaries of $214,002 in today’s dollars.
Harder hill to climb
Finder head of consumer research Graham Cooke thinks younger Aussies have a harder hill to climb to get onto the property ladder.
“Much higher prices in comparison to the average income, combined with sky-high interest rates, make today’s property market particularly unaffordable for young Aussies – and more so for those with no access to the ‘Bank of Mum and Dad’,” Cooke said.
“This means we are witnessing a situation where the gap between the rich and the not-so-rich will likely widen.”
Younger Aussies not optimistic
New research by Afterpay found one in five Gen Zs believed they would never be able to afford their own home. It found only one in six Gen Z’s own their own home, compared with a quarter of Baby Boomers when they were the same age.
University student Emma Silva is currently living with her parents while she completes her degree and said even moving into a rental wasn’t feasible for her right now.
While the 20-year-old hopes to own a home at some point in the future, like Aimee, Emma said her student debt was something she was becoming increasingly aware of.
“I’m very conscious of my HECS debt. It’s just another expense that is going up with inflation as well. So, [eventually], I’m going to be paying that back on top of already-expensive rent and food,” Emma said.
Emma is studying a marketing and communications degree, which is expected to cost her around $30,000.