Perth, Sep 1 (The Conversation) - As many young Australians grapple with entering the tough housing market, it's becoming increasingly common for them to turn to the "bank of mum and dad" for assistance. But what kind of financial support are parents willing to provide, and how has this evolved over time? A recent survey of 1,725 Australian parents, mainly aged 45 to 64, sought to explore these questions.
Assistance on the Rise - Despite a wealth of research highlighting young adults' dependency on parental support to purchase their first home, details about the extent and nature of this assistance remain limited. This includes understanding how much parents are reaching into their own resources to provide help and the potential financial repercussions for them.
Earlier this year, utilizing the online survey platform Qualtrics, researchers endeavored to shed more light on this issue. Out of the 1,725 surveyed parents, 61% were aged 45-64, 34% were between 65-69, and 5% were under 45. The survey began by questioning if the parents had helped at least one of their three eldest children buy their first home.
More than half of the respondents, or 994 parents, affirmed they had assisted at least one child. Among those whose children bought homes over a decade ago, 44% provided help. This support increased to 50% for children who purchased homes five to ten years ago, and 58% for those who bought within the past five years.
Rent-Free Living Surpasses Cash Gifts - The survey found that living rent-free has become the most popular form of support in recent years, surpassing direct cash gifts, which were more common a decade ago. These insights offer a glimpse into how families are dealing with the pressing challenge of unaffordable housing and declining homeownership rates.
While the study sample wasn't intended to represent all Australian parents nationwide, it focused on those who had helped their children purchase their first home. Quotas on income, region, and ethnicity ensured a diverse representation.
Emerging Trends Over Time - Analyzing responses from the 994 parents who had offered help over the past decade or more revealed some long-term trends. About one in five children (22%) received multiple types of support, with the most common combinations involving direct support like gifts, loans, or guarantorship paired with rent-free living.
Both homeowning and renting parents were found to assist their children. However, homeowning parents were more likely to provide financially intensive help, such as cash gifts and loans, while renting parents tended to offer rent-free accommodations.
Higher parental incomes correlated with a sharp increase in loan use, surging to 41% among those with parental incomes exceeding $200,000. Children of higher-income parents also benefited more frequently from rent-free accommodation in secondary or investment homes, significantly boosting their chances of homeownership.
The survey further explored the origin of financial gifts or loans. Most parents (78%) who gave cash gifts used their savings. Among those providing loans, only 46% relied on savings. Nearly one in three (29%) used home equity, and another 12% drew from equity in a second property.
Going the Extra Mile - Thirty-six parents reported taking further measures to help their children secure homeownership. Seven of these (19%) co-purchased homes with their children or entered loans as co-borrowers, using their own homes as collateral. Three parents (8%) signed their properties over to their children, while another three (8%) provided early inheritances, transferring wealth sooner than expected.
Wealth Divide Persists - The benefits of parental homeownership are increasingly being passed down through generations. Parents are drawing from various asset sources, including savings, home equity, and superannuation, to provide financial gifts or loans. However, these efforts are not without risk. Beyond financial strain, the lack of legal protections exposes older Australians to potential financial abuse.
Moreover, a substantial number of young Australians lack access to well-resourced parents who can support their homeownership goals. As parental assistance becomes more crucial, this trend threatens to deepen the housing wealth gap among young people based on their access to the "bank of mum and dad." (The Conversation) GRS GRS
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