26 August 2019
A combination of stricter lending standards, low interest rates, and high house prices have contributed to the younger generation (18-35) finding it harder than their parents to own a home.
Amid growing house prices, it’s no surprise that Australian millennials have the second-lowest rate in home ownership among nine similarly developed economies according to multinational banking group HSBC.
With the older generation now wealthier due to appreciation in their assets and larger savings for retirement, many parents or grandparents are delaying retirement to help their kids on to the property ladder. Here are some other ways that you can help your kids get up and running in their own property.
Sacrificing holidays and new cars
To make sure you have money to give your kids, many parents are forgoing holidays and new cars to see that their children are set up in property. According to the 2018 Generational Property Ladder Survey (1072 respondents), 33% of parents are prepared to delay major purchases like holidays or a new car.
Live more simply for a while
If the kids are going without the avo toast and brunches, Mum and Dad might have to as well. 39% of parents are willing to live on a tighter budget so they can save up and help their kids to see them buy a property.
Giving them a cash gift or interest free loan
Though you may have been sitting on a nest egg for retirement, giving your kids a cash gift or interest free loan so they have a deposit is another strategy for helping them buy a home. 60% of parents in the survey said they’d consider giving their kids a cash gift, and 49% have given them gifts already. 30% of respondents say they’re prepared to dip into their own coffers to assist their children.
Is downsizing an option to help the kids buy property?
Only 10% of respondents to the Property Ladder survey say that they’re willing to refinance their home loan to free up cash for their children. However, downsizing to a smaller home while selling or renting out their former home can free up capital to help their kids get their first step on the property ladder.
“32% of parents said they would purchase a home together with their children in a partnership, which could be made easier on the parents if they opted to downsize,” says property expert and Savvy CEO Bill Tsouvalas.
“Some smaller properties in outer suburbs or regions can be had for as little as $250,000 – a fraction of what a three-bedroom home might cost in Sydney or Melbourne’s inner suburbs. If their current home is valued upwards of $6-700,000, this could be a significant windfall and an opportunity to retire a bit sooner.”
Many of these smaller properties are villas in retirement communities, which offer a range of leisure activities and health services.
Downsizing can free up capital to use as a gift or loan to one’s children – or as a deposit for a partnership in a home.
This article is contributed by Savvy, Australia’s leading financial brokerage institution and one of the BRW’s fastest growing companies in 2015. Visit www.savvy.com.au for more info.
The article has been prepared without taking into account your personal objectives, financial situation or needs.
Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.
