Unaffordable house prices have given rise to a new trend: parents now have to shell out cash to help their children buy a house. This has been confirmed by no less than Australia’s most senior banker, outgoing Reserve bank governor Glenn Stevens.

“I think that a lot of people of my generation are actually going to find themselves, if they haven’t already, helping their children into the housing market because that may be almost the only way that their children can enter the Sydney market,” Stevens said.

According to an ME Bank survey of 2,000 mortgage holders earlier this year, 26 per cent of them had received financial assistance from a family member to buy their first home. The average amount has increased from $27,000 to $42,000 in the last five years. Furthermore, around 28 per cent of those who helped a family member buy a home in the last five years hurt their retirement.

That is why experts suggest that parents advise their children to lower their expectations and look for homes in outer suburbs rather than give them money.

“There are a lot of homes on the outer fringes of Melbourne, Sydney, and Brisbane available for $300,000. Younger couples can afford that,” said Queensland University of Technology professor Chris Eves.

If parents really must help their adult children, the safest option is to provide them a personal loan proven in writing and backed by a second registered mortgage. Cash gifts may also help, but BFG Financial Services managing director Suzanne Haddan warned parents about the tendency of children to borrow more as a result.

“What you have to be careful of is that you’re not so benevolent with your gift that the children end up taking on more debt because of it,” she said.

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