What is the Bank of Mum & Dad?
Increasing numbers of younger Australians are relying on financial help from their parents to enter the property market. But this arrangement can backfire it not handled correctly. Here are some tips.
Family support has become “the single biggest factor” enabling young Australians to enter the property market, according to new research by The University of Sydney. 1
The Australian Housing and Urban Research Institute found that 40% of people aged 25-34 expected to call on the “Bank of Mum and Dad” to achieve home ownership, with 74% of adult renters holding less than $5,000 in savings.
Lead researcher Dr Laurence Troy says rapidly rising house prices and the high cost of living have further limited the chances of young Aussies buying a house, with even people on moderate incomes falling behind.
“One of the most important saving strategies to emerge was living with parents or in properties owned by parents,” he said.
Dr Troy said it was a worrying trend if only young people with supportive parents were able to get into the market, leaving many others locked out.
First home buyers without parental support may be eligible for government assistance. To see what you might qualify for, download our information brochure here.
- Bank of Mum and Dad worth $35 billion; 2
- More than 60% of first home buyers receive some financial support from their parents;
- About 7% of parents also help their children to pay the mortgage;
- Over half of Australian parents (52%) help their children financially;
- Home ownership among young Australians has been in decline for two decades.
Young Australians and home ownership: the facts
- Saving for a deposit is a major challenge for young adults due to high house prices and the insecurity of employment;
- 40% of those aged 25–34 say they intend to rely on family support to buy a house; 2
- 54% of those aged 25–34 in Sydney plan to purchase a owner-occupier property in the next five years;
- 19% of those aged 25-34 in Sydney say they intend to purchase an investment property;
- Among people earning less than $104,000 a year, 70% believe they will need a large inheritance if they are to buy a house;
- Less than 24% of this group believe they can get into the property market without help from the Bank of Mum and Dad.
Six tips for Mum & Dad Bankers
- Ensure your own financial situation is in good shape before gifting or lending money to your children; 3
- Research different investment vehicles available and choose the right one for your circumstances;
- Is it a gift or a loan? Be clear about the terms of assistance, and whether the money needs to be paid back;
- If making a loan seek legal advice so that the terms of the loan, including repayment terms, are properly documented;
- If helping out with a deposit or a home loan, ensure that your child can keep up with mortgage repayments;
- Insist that your children take out income protection insurance to ensure that repayments will be made.
Snapshot: Paramount on Parkes, Harris Park
Located in the heart of the Parramatta CBD, Paramount on Parkes is an award-winning development. Each of the 331 apartments features premium materials, superb finishes, natural light and panoramic city and mountain views. Prices for a one-bedroom apartment start at $705,000. Residents enjoy resort-style facilities such as a swimming pool and a sun deck plus access to a vibrant urban precinct alive with great restaurants, bars, cafes, parks and retail outlets. Construction is well underway with the tower expected to be completed by the third quarter of 2024.
If you would like more information about any of these schemes or want to know more about one of our projects, get in touch with the ALAND Sales Team on 1800 025 263.
1 Source: The Guardian
2 Source: Finder.com.au
3 Source: The Australian