It is no longer feasible for many 25–34 year olds to independently save up enough for a deposit. Image – Supplied
  • AHURI has released a 'Pathways to home ownership in an age of uncertainty’ report
  • 74% of young adult renters reported they had less than $5,000 in savings
  • Circa 40% of homeowner hopefuls expect to call on the bank of Mum and Dad

The dream of homeownership is riddled with challenges for young adults with frivolous spending definitely not a lifestyle option for homeowner hopefuls according to new research released by Australian Housing and Urban Research Institute (AHURI). Leisurely smashed avo brunches might be the stereotype for young people, but the study revealed that family support has become key for many young adults to achieve home ownership.

The research, Pathways to home ownership in an age of uncertainty, undertaken for AHURI by researchers from the University of Sydney and Curtin University, examines how young householders aged 25 to 34 in Sydney and Perth are adapting their spending, saving behaviours and living arrangements in order to be able to buy a home.

University of Sydney and Curtin University researchers conducted the study titled Pathways to Homeownership in an Era of Uncertainty for AHURI. The research analyses how individuals aged 25 to 34 in Sydney and Perth are modifying their spending, saving habits, and living situations to achieve homeownership.

Rapidly rising house prices and increases in the cost of living have made the challenge of buying a home much worse, with households—even those on moderate incomes—unable to keep pace with market increases through their usual saving and budgeting strategies

Median Australian advertised prices

The task of purchasing a home has become more difficult due to the swift escalation in housing prices and the growing expenses of daily living. Even individuals with modest incomes are finding it challenging to keep up with the market hikes using their conventional savings and financial planning methods.

The surveyed individuals fall within the age range where it is typical to have purchased or be in the process of purchasing, their first home. Roughly 40% of respondents in Sydney and 47% in Perth have already achieved home ownership.

Calling the bank of Mum and Dad

40% of the 850 surveyed young adults anticipated receiving financial assistance from their families to purchase a home.

The University of Sydney Lecturer in Urbanism in the School of Architecture Design and Planning, Laurence Troy was involved in the research. 

“The financial diaries also showed that for the young people living in Sydney, family support was essential for those who had bought a home.”

Laurence Troy, The University of Sydney Lecturer

“For the people living in Perth, it was still possible to buy a home without direct family help, although a number did benefit from both financial and non-financial support from family,” said Dr Troy.

The study examines young people aged 25 to 34 in Sydney and Perth. Image – Canva

Indirect support from families

While many young people might not have the direct support of the bank of mum and dad, they often rely on indirect help.

“One of the most important saving strategies to emerge was living with parents or in properties owned by parents,” said Dr Troy.

“This meant a combination of little or no rent, utilities and food, and reduced spending in all major necessity categories. As a result, people can plan better and a larger share of income could be diverted to savings, and this also enabled lower income earners to consistently save.

“However, if only those with families who are able to provide support can do so, then those who don’t have a supportive family are potentially locked out of home ownership altogether. And by extension, locked out of the important wealth-building dimension that housing provides, particularly into retirement,” said Dr Troy.

Uncertain incomes hamper homeowner hopefuls

The research uncovered a significant issue that young adults face in saving for a property deposit – their incomes are unstable or inadequate.

A staggering 70% of those aged 25-34 surveyed had held multiple jobs in the past five years, highlighting the job instability that many young people experience. Furthermore, over 40% of those surveyed were seeking additional work hours.

As a result, more than 74% of renters in both cities reported having savings of less than $5,000.

The research indicated that a 20% deposit on the median home price in Sydney would require $220,000, while in Perth, it would be $106,000. This means over 95% of young adult renters have not saved enough to meet this target.

The research underscores that even though many young adults could afford the monthly mortgage payments – which may be comparable to or lower than their current rent – their main obstacle to entering the property market is the challenge of accumulating the required deposit.

“In the past, we had certain rules and assumptions, for example, the gold standard was the size of a mortgage should be no more than four times your annual income, but these are now irrelevant.”

“Instead, we observe all-options-on-the-table attempts to scramble together enough cash to buy into the market,” says Dr Troy.

“The idea that there is a particular financial strategy that is suitable for the average household aspiring to home ownership is increasingly problematic. Generally, the strategy is to save as much as possible, reduce spending and call in favours from family.”

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