The new research from financial comparison website Mozo reflects the difficulty first home buyers have in taking their first step onto the property ladder.
Parents lent a collective 65 billion to their children to assist with their property purchases, with 67 per cent of parents not expecting a repayment. On average, parents lent $64,206 to their children.
Mozo director Kirsty Lamont said house prices around Australia can be daunting for first home buyers.
“It can take years to scrimp and save for a home deposit, all the while house prices continue to skyrocket, becoming increasingly inaccessible,” Ms Lamont said.
“We’re seeing the Bank of Mum and Dad playing a huge part in helping children take their first step towards acquiring a home,” she said.
“With Australian property prices rising by 618% over the past 30 years and national incomes failing to keep up, the Bank of Mum and Dad is proof of family generosity but also points to a broken property market for younger generations.”
NSW is the most generous state for parental lending with an average lend of $88,250 per family, totalling $32.7 billion. Victoria and South Australia rank second equal, lending around $63,000 per family, while ACT and NT are the least generous, lending $20,083 and $15,000 per family respectively.
Mozo’s Bank of Mum and Dad survey found that the most popular ways for parents to help their kids get a foot on the property ladder are allowing their child to live at home rent free while saving for a deposit and contributing money towards a deposit. Less popular options included acting as a guarantor, assisting with repayments, or buying property on behalf of or as a partner of the child.
How Australian parents are helping their kids onto the property ladder
- Allowed to live at home rent-free: 43% of parental lenders
- Contribute money towards deposit: 41%
- Acting as a guarantor: 13%
- Assisting with repayments: 9%
- Buying a property on behalf of, or as a partner of the child: 9%
Note that some parents provided multiple forms of assistance, resulting in percentage exceeding 100.
How Australian parents are financing their contribution to their children
In order to help their kids onto the property ladder, 66% of parental lenders have chipped into their own savings while 26% have cut back on expenses and 13% have pulled equity from their own home. The majority (67%) did not expect repayment for their contribution while 29% expected payment in part or full, without interest. Nine per cent of parental lenders delayed retirement while four percent sell assets to fund their children’s property purchase.
The most expensive methods of helping children are buying property on behalf of the child (costing parental lenders an average $231,750) and buying the property as a partner ($155,762). Assisting with repayments is costs an average $31,711 while allowing kids to live at home rent-free costs an average $25,441.
“For younger generations aspiring to own their own home, the sheer luck of family assistance can be a deal breaker as to whether or not they have the opportunity to purchase their own property,” Ms Lamont said.
“While it may be cause for despair there are ways for first home buyers to save for a deposit without the help of Mum and Dad. From ditching credit card debt to looking at first home owner grants in your state, there are ways to make your first home purchase a possibility,” she said.