Yahoo Finance Well-paid jobs not enough to save Baby Boomers from common sacrifice: 'Scares me'
A young Aussie said he's 'lucky' he can call on his parents for help to buy a property, but many aren't as fortunate.
A young Aussie has opened up about a major problem affecting his generation when buying a home. Despite working a well-paid, full-time job and living at home with his parents, the Sydney resident said it's still really difficult to stump up enough money for a deposit.
Compare the Market executive director David Koch wrote in an op-ed for Yahoo Finance that the Bank of Mum and Dad has become so prolific in Australia due to soaring property prices that it's technically the sixth biggest home lender in the country. He said the number of Aussies needing help from their parents to buy their first home sits at around 40 per cent.
That's a marked increase from 15 per cent in the 1980s.
The young Aussie said he's in a "lucky" situation, but many aren't so fortunate.
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"I've been living at home to try and save up and luckily my parents have just sold our family home, and I'm in a very lucky position that I am able to get some money for them to help," he told Q&A.
"But if I wasn't, it would be near impossible. And I'm working quite a good job, so it is a big challenge for people of my generation."
Minister for Housing and Homelessness Clare O’Neil said her government was trying to do everything possible to increase the supply of homes, especially so that young people can get a foot on the property ladder. But she admitted that the property and population landscape across Australia is so different now than a few decades ago.
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“Your story is a really common one and you sort of mention a fleeting reference to the Bank of Mum and Dad," she said.
“The thing that scares me most is when I look at how the housing prospects for young people in our country have changed since the 1980s.
“If you look at a low-income young person in 1980, at the time, 60 per cent of young people owned their own home. Today that figure is about 20 per cent.
"This tells us that the life experience of being a low-income person in our country today has radically shifted over a 40-year period just because of housing.”
A poll of Yahoo Finance readers found a whopping 88 per cent of Aussies can't afford a home deposit because of the cost of living and their rent.
Should you dip into the Bank of Mum and Dad to buy a home?
Finder money expert Sarah Megginson said many young Aussies would be priced out of the market if they didn't call on their parents for help.
“Recent property price hikes, combined with interest rate rises, have made it extremely tough for young buyers to save a sufficient deposit, let alone qualify for a home loan,” Megginson said.
“Buying a home also comes with new responsibilities such as managing hefty council rates and strata fees, paying for ongoing repairs and managing your money.”
But she urged older Aussies to make sure they “put their oxygen mask on first” before helping their kids, rather than risk damaging their own retirement fund.
“It’s important to consider whether you are financially secure before helping family members, and look for ways to work towards a mutually beneficial outcome.” Megginson said.
Dream of owning a home with a backyard 'might be' over
The dream of owning your own home with a backyard might be over for many Aussies who want to live close to the city. With soaring property prices and a lack of building projects underway, the chance of you nabbing that white picket fence home with a place for the dog and kids to run around appears to be getting smaller and smaller.
Finance journalist Alan Kohler was asked by a Q&A audience member on Monday if young Aussies should give up on that idea and he admitted it "might be" impossible for many. But he said a home with a backyard could still be available for those who don't mind where they live.
“The backyard has become really expensive, particularly close to the city,” Kohler said.
“I think we’re in the situation now where if you want a backyard, you’re going to have to move a fair way away from the city.”
Reducing migration might help housing but obliterate the economy
Clamping down on the number of people immigrating to Australia has been touted as one piece of the puzzle in fixing the housing crisis.
The Grattan Institute found that if overseas migration fell to 190,000 per year, rents and house prices would be about "4 per cent lower than otherwise after a decade".
If migration came down to 160,000 per year, then prices would fall by roughly 6 per cent.
For context, overseas migration to Australia in the 2022-23 financial year was 528,000 people. In the Federal Budget, the government estimates it will fall to 395,000 in 2023-24 and then to 260,000 in 2024-25.
But Grattan Institute CEO Dor Sathanapally told the ABC programme that reducing migration has its own downsides.
She said the move would gravely impact small businesses and universities and estimated the bill would be "$200 billion over 30 years" given the loss in tax revenue.
“So we can do it and cut migration but we shouldn’t pretend that isn’t a costly way to go about solving a housing problem when the source of the problem is our failure to build enough houses for the population we always knew we were going to have by this point,” she said.
“The care sector will tell you it’s costly because it affects our aged care workforce and childcare workforce."
“If we don’t get our housing system right and we can’t accommodate the workforce that we need, the working age population we need, that creates all sorts of problems elsewhere.
“So even a reduction as such as what the Coalition has proposed of 25,000 in terms of our skilled migration, we’ve calculated that would cost us more than $200 billion over 30 years and that’s because migrants pay more in tax than they take in services.”
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