For many young Australians, breaking into the housing market feels tougher than ever, with many fearing they may never own a home. Public debates continue over whether it is harder now than decades ago. Buying a home is tough for young people so how do some manage? even though declining homeownership rates suggest the market has shifted dramatically against first-time buyers.
Our newly published study explored the major barriers and factors that might tip the scales in favour of homeownership. Despite the high cost of houses relative to income, some young Australians are still managing to buy homes. Although disciplined saving is important, a boost from the “bank of mum and dad” can be a game changer.
Using 14 years of data from the 2006–2020 HILDA survey, we tracked independent adults aged 25–44 who were not homeowners. In 2006, average house prices in major cities were 4.5 times the average household income – for instance, in Sydney, properties cost around A$600,000 compared to an average income of A$102,000. This ratio rose to 6 times by 2018 before falling slightly to 5.4 at the start of the pandemic, illustrating that house prices are outpacing income growth.
As affordability worsens, the proportion of young non-homeowners receiving parental support has increased from 3.1% in 2006 to 5.3% in 2020. Contrary to claims that young people spend frivolously on “smashed avocados,” our data show they are saving more: in 2006, about two-thirds of non-homeowners saved regularly, rising to four in five by 2020, while long-term financial planning increased from 47% to 55%.
However, regular saving alone is less effective than parental help in overcoming rising prices. Our research found that once house prices exceed three times an individual’s income, the odds of homeownership are halved, whereas receiving more than $5,000 in assistance from parents can quadruple these odds. Additionally, young people living rent-free in family or friends’ homes have over double the chances of buying a home compared to private renters.
This creates a distinct advantage for those from well-off families, while those without such support face steeper deposit hurdles and may miss out on areas with better job prospects.
For those lacking parental assistance, government intervention is essential. Policies such as easing mortgage restrictions could help first-time buyers, although this may expose them to greater financial risk. Furthermore, government grants must be carefully targeted to avoid pushing house prices even higher unless the supply of entry-level properties can keep pace. Finally, tax reforms could help increase the supply of affordable dwellings and curb demand from multi-property owners who crowd out first-time buyers.
