While young Australians are eager to fly the nest and own their own homes, many are facing the harsh reality that they’ll have to rely on their parents to help them enter the property market.
According to a new survey conducted for State Custodians Home Loans by Galaxy Research, one in three Gen Y respondents who don’t own a home admit they’ll need some sort of parental assistance to climb the property ladder.
Twenty-nine percent of respondents aged 18 to 34 said they’re relying on their parents to either gift or lend them money to meet their deposits, while 26% are waiting for some kind of parental inheritance to help them out.
Thirty-seven percent of respondents said they’ll need to make difficult lifestyle choices, such as moving back in with mum and dad, to save enough for a deposit.
Aside from their renewed dependence on their parents, 20% of Gen Y said they’d have to put plans of having their own children on hold in order to save for a deposit.
“It’s expensive to live in Australia, especially if you’re in a capital city,” said Joanna Pretty, general manager at State Custodians Home Loans. “Whilst everyone would agree 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.”
While the new financial year budgetary measures will help first-home buyers to some extent, the reality of scraping together a deposit will still be challenging.
“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 will provide some benefit for some buyers. However, across-the-board first home buyer grants would be far more helpful, as far as a lump sum goes,” Pretty said.
Thirty-nine percent of respondents said saving wages from their current jobs would be the most realistic way for them to get the money they’ll need for their deposit, while 28% said the money they’d be able to put aside from a new, more highly-paid job would help them afford property.
That’s a difficult feat, considering that wage growth can be generously described as sluggish. According to the Australian Bureau of Statistics (ABS), the average annual wage is $78,832, and the average loan to a first-home buyer across all states to June 2016 is $335,000.
To come up with a 20% loan deposit of $67,000, a person earning a median wage with an after-tax monthly pay packet of $4,434 would need to put aside $1,116 every month for five years. Needless to say, that’s on top of what they’d be paying for rent and other expenses.
“It is definitely tough to buy in metro areas these days, especially if you’re struggling to make ends meet on your current wage,” 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.”
The study was conducted by Galaxy Research from April 7-10, and was administered online amongst a nationally representative sample of 1,006 Aussies aged 18 and older.