More parents are helping finance their kids’ first-home purchases

Font size :
Beset by lending restrictions, dwindling government grants, and exorbitant property prices, young Aussies wanting to buy their first homes are rapidly turning to a stable source of finances: their parents.

More parents are taking advantage of record-low interest rates to refinance their properties. They’re doing this to help their adult children purchase their first homes amid skyrocketing house values.

Research and consulting firm Digital Finance Analytics estimates that the number of Australians getting help from their parents has increased to more than half of first-time home buyers from just three percent six years ago.   

Australia’s housing rally favours baby boomers. This is locking out young adults from the housing market and is compounding an inter-generational shift of wealth. To make things worse, rising property prices throughout the country has made it harder for young Australians to afford their own homes.

As the number of bank loans to first-time home buyers dwindles, the average slice of cash handed to adult children by parents eager to hoist them onto the housing ladder has almost quadrupled in the past six years. The downside is a bloated market that the Reserve Bank of Australia fears might become even more inflated.

First-time home buyers are "being infected by the notion that property is about wealth building, rather than somewhere to live," said Martin North, Principal at Digital Finance Analytics. This notion "may be tested if interest rates rise later, or property prices fall from their current illogical stratospheric levels."

Sydney, where values have risen more than 90% since the end of 2008, remains the priciest city in the country. The UBS Global Real Estate Bubble Index recently ranked Sydney the fourth riskiest city for housing bubbles among the world’s top financial centres.  

The property boom, which is being driven in part by demand from foreign investors, is turning some homes into cash dispensaries. More than two thirds of homeowners who refinanced homes worth more than $750,000 did so to obtain capital for various reasons, including helping their children. Near the start of 2010, average financial assistance from parents totaled about $23,000. Today, that number has jumped to $80,000.  
 

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Monday, Sep 25, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords