The ongoing affordability crisis is entrenching a generation dependent on parents for housing, with the number of Millennials giving up hope of moving out of home by 30 years of age surging.
The 2019 Perceptions of Housing Affordability report released today by CoreLogic, identified that the proportion of Australians who think they will be at least 30 years of age before leaving home has rocketed from 20% in 2017 to 34%.
Lisa Claes, CEO CoreLogic International said, “The report proves that the ‘cubby house’ syndrome – where children are prolonging their home stay with parents - is intensifying. Our youngest generation is effectively being locked out of the market and increasingly dependent on parents.
“If Millennials’ affordability disillusionment continues, we risk entrenching a generation who become disenfranchised from society. It raises serious issues around intergenerational equity and should be a catalyst for policy makers to address affordability at a foundational level.”
Drawing upon the ‘bank of Mum and Dad’
The report found that amid the ongoing affordability crisis, more Australians, particularly young people, are turning to family for help. A quarter of Millennials say family assistance to raise a deposit would be a great help when buying their first home. That’s a significant increase on the 21% in 2017.
One in five Millennials also viewed favorably, financial support from their family to pay off the mortgage (up from 13% in 2017).
Tim Lawless who leads Research at CoreLogic research stated, “The ‘bank of Mum and Dad’ – where young people rely on their parents to support their entry into the housing market, either by helping with a deposit or assisting with loan repayments, is becoming one of the last sources of hope for Millennials.”
Despite the challenges Millennials face, the great Australian dream of home ownership burns brightly. 86% of Millennials rate home ownership as important, making them the most passionate of all demographics. And they are in good company as, overall, 81% - four out of five - Australians believe it is still important to own a home.
“Millennials haven’t given up on the great Australian dream – they want to own homes. In fact, by being denied it, they want it even more,” says Tim Lawless. “But they are losing hope that they will ever be able to realise that dream.”
Affordability challenges ease but remain critical
The research did however reveal that housing price falls have slightly eased affordability concerns. 54% of Australians believe that housing affordability is the same or better than it was a year ago.
However, 83% of Australian non-property owners are still worried about being able to afford their first or next home (87% in 2017).
“Despite this easing of concerns we can’t be complacent. We still face major affordability challenges,” says Tim Lawless.
“Key affordability ratios show it is still difficult for Australians to afford a home and repay a mortgage. The recent gains in affordability could also be quickly lost if the early trend towards higher prices is sustained.”
Despite the lowest mortgage rates since the 1950s, home buyers are still dedicating an average 35% of their gross annual income to servicing a mortgage (down from 37% in mid-2017) and it takes the typical Australian household around 8.7 years to save a 20% deposit (down from 9.2 years in mid-2017).
Struggling to secure a loan
Australians face a number of obstacles to buying a home. They are struggling to raise a deposit, with 47% saying this.
Almost as many are finding it hard to get loan approval. It is now the second-largest barrier for Australians seeking to buy a home, with 45% saying it was an obstacle. That represents a significant increase from 39% in 2017 when it was the sixth most important concern.
“The severe tightening of credit availability following stronger prudential regulation and outcomes related to the Royal Banking Commission is hurting Australians, who are struggling to get a loan,” says Tim Lawless. “Lenders also have a greater focus on evaluating and assessing individual borrower’s expenses.”
Australians united against stamp duty
The report found that across all generations and states, Australians are united in their growing opposition to stamp duty. Some 79% of respondents thought the best strategy to improve housing affordability was to remove stamp duty (up from 73% in 2017).
Baby Boomers led the growing opposition to stamp duty, with 87% saying that reducing or removing stamp duty would improve housing affordability. That represents a stiffening of opposition among the most senior generation, as 80% were opposed to the tax in 2017.
The Boomers have strong support from younger generations, who also ramped up their opposition to stamp duty. Removing or reducing stamp duty was the number one consideration for Gen Xers at 78% (up from 71% in 2017). 72% of Millennials were opposed to stamp duty, up from 70% in 2017.
Other key findings:
- Low income households are struggling to raise a deposit for a home, highlighting the difficulties they face entering the housing market. 31% of households with an income of less than $50k wouldn’t be able to raise more than a 5% deposit and 41% wouldn’t be able raise more than 10%.
- Australians are vulnerable to rate rises. 48% of Australians believe they would struggle to meet mortgage repayments if interest rates rose two percentage points. A quarter of Australians would struggle if rates were hiked just one percentage point.
- Affordability concerns spike in Tasmania and ACT. Tasmania was the only state where more than half (55%) the residents thought housing was less affordable over the past year. Also, a larger than average proportion of residents of the Australian Capital Territory (46%) thought housing affordability has worsened over the year.
- Australians seem not to be buying the push for greater urban density as a way to address affordability challenges. Just 56% supported building more apartments close to major working areas and along transport corridors. That made it the second-least popular option.
- Despite being a major issue at the last Federal Election, concerns around negative gearing benefits to investors were not seen as a major impediment to affordability. Negative gearing was the lowest ranked impediment across all generations: 31% for Millennials, 35% for Gen X and 23% for Baby Boomers.
- Australians also didn’t seem concerned that investors were creating competition in the marketplace and pushing prices higher. Investment activity in the market was seen as a low affordability obstacle for all generations: 36% for Millennials, 39% Gen X and 28% for Boomers.