At 1 Mills St, Sunshine North, this pink-painted four-bedroom weatherboard house has a $630,000-$690,000 asking range – making it an affordable option for many first-home buyers.
Cashed-up first-home buyers bankrolled by the bank of mum and dad are poised for a major run at Melbourne’s housing market.
But it could come at the expense of their peers from less wealthy neighbourhoods and rental households, with fears parental support is driving up prices and squeezing some buyers out of the housing market entirely.
Research from Seer Data & Analytics, commissioned by Philanthropy Australia, forecasts Toorak households will typically pass $3.3m from one generation to the next this decade. Brighton households will shift $3.08m, between 2021-2030.
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Parents in another eight areas, mostly in the city’s east, southeast and northeast suburbs, will be able to gift seven-figure amounts above $2.71m to their offspring.
And according to McCrindle Research they might need the money, with three in five Generation Z members now believing their only way into the housing market will be via help from older relatives.
PropTrack’s latest figures show there are currently just 17 Melbourne suburbs left where market entrants can buy a median-priced house for under $600,000 – helping them to dodge paying stamp duty under the primary state government assistance program for first-home buyers.
There were 56 suburbs to choose from three years ago.
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According to PropTrack, there are just 17 Melbourne suburbs left where median-priced houses cost less than $600,000. Picture: Mark Stewart.
Seer Data & Analytics co-founder and chief executive Kristi Mansfield said Australian Bureau of Statistics data including birth and death rates, age groups and net household wealth was used to calculate the inheritance estimations for Melbourne’s suburbs.
“Most of that wealth will transfer to older women because we know they usually outlive their husbands, and for the most part, that will then go to their children or family members,” Ms Mansfield said.
A three-bedroom house at 9 Beauview Pde, Ivanhoe East, is for sale with a $2,799,000 price tag – it’s one of the top Melbourne suburbs where parents are estimated to transfer inheritances to their children, across 2021-2030, with a $3.07m average windfall per household.
New research from Digital Finance Analytics shows that the percentage of first homebuyers seeking help from parents jumped from 3 per cent in 2010 to 59 per cent now, with the average loan for a deposit increasing from $23,000 to $107,000.
“We have created a two-speed property market, where those with access to family wealth can pay more and bid prices up, whereas those whereas those without this leg-up are being excluded,” the company’s principal Martin North said.
Demographics Group co-founder Simon Kuestenmacher says many Australians cannot get into the housing market without family help. Picture Glenn Hampson.
Demographics Group co-founder Simon Kuestenmacher said at the moment, many buyers could not afford a house in Melbourne where PropTrack put the median house value at $921,000 in June.
“That’s definitely the case and is already occurring, we are splitting Australia into a class of asset owners and non-asset owners,” Mr Kuestenmacher said.
11 Prunus Grove, Doveton, on the market with $660,000-$720,000 price expectations, is another house which provides a more affordable prospect for many buyers.
He noted that in a scenario where two couples with similar jobs and wages both wanted to bid on the same house, the pair receiving assistance from the bank of mum and dad would always have an edge.
“We know this is driving up prices and makes it even less likely for asset-poor people to buy a house,” Mr Kuestenmacher said.
This would result in the number of renters growing even more, he added, although if the federal government removed the stamp duty tax it would encourage older Australians to downsize and free up more housing stock.
Saving for a house can be tricky if people need to also pay rent.
However, Mr Kuestenmacher said he believed that in the next 10 to 15 years, the nation would head towards a system of taxing a person’s wealth instead of their income and consumption, which would likely make purchasing a house easier for Generation Z.
“The big losers here are the Millennials, people born in the 1980s and 1990s, whose parents can’t help them at the moment for reasons including the rising cost of living, they have to pay for university and petrol is expensive,” he said.
Finder research suggests one in 10 Australians are expecting an inheritance in the next decade. Picture: William West/AFP.
According to comparison website Finder, one in three Australiansexpect to receive an inheritance over the coming decades – the equivalent of 7.5 million people.
Their figures show Baby Boomers are set to transfer about $175bn each year in assets and cash to their children and grandchildren over the coming decades, either in wills or via living inheritance.
Top 10 Victorian areas with biggest forecast windfalls for kids, 2021-2030:
Toorak
Average inheritance: $3.3m
Households to benefit: 880
Brighton:
Average inheritance: $3.08m
Households to benefit: 1505
Ivanhoe East-Eaglemont:
Average inheritance: $3.07m
Households to benefit: 358
Malvern-Glen Iris:
Average inheritance: $2.94m
Households to benefit: 1103
This house at 747 Malvern Rd, Toorak, has a price tag of $3.16m, slightly below the average inheritance that residents in the suburb are expected to pass onto their children between 2021 and 2030.
Surrey Hills-Canterbury:
Average inheritance: $2.83m,
Households to benefit: 889
South Yarra:
Average inheritance: $2.79m,
Households to benefit: 405
Camberwell:
Average inheritance: $2.74m,
Households to benefit: 1268
Research-North Warrandyte:
Average inheritance: $2.74m
Households to benefit: 222
Templestowe:
Average inheritance: $2.72m
Households to benefit: 1014
Balwyn North:
Average inheritance: $2.71m
Households to benefit: 983
Source: Seer Data & Analytics
17 The Righi, Eaglemont, has a $2.98m price guide. That’s below the $3.07m average inheritance families in the area are set to transfer to their kids.
TIPS FOR PARENTS WHO WANT TO HELP THEIR KIDS GET A HOME
+ First, review whether you’re on track to meet your retirement objectives, have adequate cash for emergencies and understand how saving for a child might impact your weekly budget, mortgage balance or lifestyle;
+ If helping out with a deposit or home loan, make sure your child is able to keep up with the repayments. You don’t want to end up with another mortgage;
+ If you’re planning to save money to help them, consider equities and investments as a way to fast track the process. Superannuation is the most tax effective vehicle, but you must reach preservation age (at least 55) to withdraw funds.
With a $520,000-$560,000 price guide, 16 Bianca Blvd, Tarneit, is located in Melbourne’s outer western suburbs, a destination for many first-home and young buyers seeking an affordable house.
+ Be clear about the terms of your assistance. Ask yourself if it’s a gift or if you want to be paid back. If so, do you want to be paid some or all of the amount, and over how long? Being clear upfront sets expectations from relatives and should help avoid confusion and family conflict;
+ Consider other ways you can help your kids with their cost-of-living as they’re seeking to buy. Can you allow your child to live in your home in a rent-free environment, or even a granny flat?
Source: Australian Unity executive general manager of life and super Adnan Glinac
![Australian Unity executive general manager of life and super Adnan Glinac](data:image/svg+xml,%3Csvg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 768 1024"%3E%3C/svg%3E)
Australian Unity executive general manager of life and super, Adnan Glinac.
+ Don’t wait until you die to help out your kids. There are ways you can help them right now without having to wait for an inheritance – and these don’t need to impact your own financial situation;
+ Sometimes the road into your dream property looks a bit different and the strategy to get there is changing – consider all options available to you;
+ Get into the market now. Property is never going to be as cheap as it is right now. Today’s generation cannot out-save the pace the market is growing at right now, they need help to get their foot in the door;
+ Consider ‘rentvesting’, rent where you love and invest in an affordable area. This means you are getting onto the property ladder and not sacrificing proximity to the things you love in the process;
+ Avoid expensive mistakes by following a proven process, not every investment is a winner and you need expert guidance to avoid making a mistake.
Source: Melbourne-based property investment group OpenCorp founder and co-chief executive Cam McLellan
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