Late last year, I achieved the great Australian dream: I bought my own home – a small, grey apartment – in one of the most expensive housing markets in the world.
Several months in, there’s still a big part of me that doesn’t like talking about it. I’m not game for lying when friends and acquaintances ask me how much I’m paying in rent, but it feels almost boastful to say I’ve bought a place when I know how bad housing affordability has become.
Then, there’s also the risk that I feed into the perception that it’s not so hard for young people after all.
This week, my colleague Caitlin Fitzsimmons did some digging and talked about how data from the Australian Institute of Health and Welfare seems to show exactly that: younger Australians – at least Millennials – are entering the housing market later in their lives, but ultimately “catching up” to their predecessors.
No generation will, for the foreseeable future, catch up to the home ownership rates of the oldest Baby Boomers, she writes.
But each younger group after Boomers seems to be catching up – or even overtaking – the home ownership rates of their predecessors slightly earlier in their lives.
In other words, Australians born between 1977 and 1981 had reached a nearly identical level of home ownership to people born in the previous five years when both cohorts reached their 40s.
Meanwhile, people born between 1982 and 1986 managed to hit similar home ownership rates to their immediate elders (those born between 1977 and 1981) a bit earlier: by their mid-to-late 30s.
It’s important to note that none of the (perhaps generously defined) “younger” generations (born 1977 onwards) have actually caught up to the older generations, at least on a national level. The “catch-up” is just happening between five-year cohorts born between 1977 and 1991.
I’m also not convinced the “catch-up” among younger generations is proof that they’re finding it no harder than older generations to buy a home. There’s a difference between home ownership rates and housing affordability – both of which contribute to the housing crisis.
It’s indisputable that the size of the average new loan for an owner-occupier dwelling has ballooned, eclipsing $700,000, up from $512,000 just five years ago. And it’s well documented that the size of this debt (and overall house prices) compared to the average income has also swelled.
The price of a typical home in Australia was about four times the median income in the early 2000s. It’s now eight times the median income and 10 times in cities such as Sydney.
So, how is it possible that younger generations seem to be hot on each other’s heels when it comes to home ownership rates?
Well, as AMP chief economist Shane Oliver points out, there are a bunch of things that have made getting a foot into the housing market a bit easier – not for all younger Australians, but at least some.
Government schemes such as first homebuyer grants and lower minimum deposit requirements (while arguably driving up demand and prices) have slightly offset the growing deposits required for a home.
While it now takes the median income household nearly 11 years to save a 20 per cent deposit for a median valued dwelling, exemptions such as a 5 per cent deposit scheme for first homebuyers mean some can get in a bit earlier – as long as they’re happy to have debt up to their eyes for a while.
“The banking system has also become more competitive,” Oliver says. “There are now options including longer loan terms and interest-only loans.”
Being locked into a 30-year loan is something that older generations may not have considered – or needed. It might mean getting a loan and a foot in your first front door is easier, but also being saddled with debt for longer: hardly a better arrangement, especially with income growth barely keeping up with inflation over the past few years.
But the big factor is the bank of mum and dad.
As Boomers, many of whom have benefited from rising house prices, downsize, part with some of their savings, or pass on entire inheritances to their children, some of the younger generations have received – and will continue to roll in – a windfall (trillions of dollars over the next decade or two, according to the Productivity Commission).
That’s a game-changer, sure, but one we can’t be blinded by.
As a Zoomer with unusually old (sorry if you’re reading, Mum and Dad) parents who fall into the Boomer category, I’ve benefited in a lot of ways.
Not only did they – and the bank of grandma and grandpa – agree to lend me the shortfall when I found an apartment just out of my price range, but I also got a leg up in other ways.
I never paid rent or had to chip in to keep the lights on for the two decades I lived with my parents in Perth. I had time to study and pursue extracurriculars relatively uninterrupted (except for a year or two when my brother picked up the trumpet), meaning I could make the grades and gain the experience that helped me land a great job. And I’ve benefited from being in the right place at the right time throughout my career.
Sure, I’ve worked hard, faced some painful challenges, and made sacrifices. But without all the right circumstances, I could have found myself much further from home ownership.
Plenty of my friends are in exactly that position. Some have chosen to move overseas where the cost of living, including housing, is cheaper. Others trundle on knowing they may never own a home, or accepting it may take them decades. Home ownership shouldn’t be determined by choosing the right parents, but unfortunately, that’s what we expect babies to do these days.
An Australian Council of Social Service (ACOSS) report from last year noted wealth inequality among younger households has worsened, with the top 10 per cent seeing their wealth grow by 126 per cent and the bottom 60 per cent only seeing their wealth rise by 39 per cent in the two decades to 2022.
We’re yet to see census data on home ownership when it comes to Gen Z and Gen Alpha, but there’s little to celebrate if younger generations playing catch-up in the home ownership game is largely due to longer, bigger loans, or luck-of-the-draw inheritances.
The fact remains that housing – both house prices and rents – costs are far too high compared to the average Australian income. As much as I’d benefit from the value of my apartment soaring (now that I’ve locked myself into three decades of debt chewing up nearly half of my income) that’s not what I want.
We may not think about it much beyond our own interests, but the lack of housing affordability comes with a lot of costs we probably don’t even realise we’re paying beyond our mortgage or rent.
When people are spending huge amounts of money on housing, it puts them under financial stress, risking their health and wellbeing and reducing productivity: one of the main drags for our economy. It also worsens inequality, putting pressure on social cohesion at a time when it is already on the rocks and creating instability. Worst of all is the human cost. We need to look after one another and ensure one of the most basic human needs is met.
It should be fair game for all generations to achieve home ownership – not just those who got in early or got out of the womb late enough to win the second-hand lottery.
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Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.
