Property out of reach of first-homebuyers with no family money behind them

A suburban class war is brewing, with new data showing almost half of homebuyers will pay cash and 50 per cent of buyers will use family money within three years, leaving first-homebuyers on average incomes struggling to buy.

More than half of all first-homebuyers in the next three years will have help from their family, and almost half of the nation’s property transactions will be “cash only”, according to a leading property analyst.

The dire prediction for average income earners competing to get onto a rung on the property market ladder without help from the Bank of Mum and Dad comes after two years in which the real estate spending power of first-homebuyers has halved.

The crisis has mobilised the Albanese government, which has promised a major package in next month’s Federal Budget.

The results from surveys of 52,000 households by mortgage specialist Digital Finance Analytics also found only 10 per cent of property is now classified as “affordable” for first-homebuyers.

DFA has also found interest rates rises and inflation have cut first-homebuyers’ spending power by 48.5 per cent since rates began to rise.

Stephen Michaels and Magdeleine Hountalas, with their son James Michaels, are selling their Padstow home and think they were very lucky to buy when they did. Picture: Richard Dobson

Investment bank Jarden’s chief economist Carlos Caccho said property was now out of reach for most.

“The bottom line is if you or your family are not already on the property ladder, if you are talking about someone on an average income, it is almost impossible,” he said.

“One way to think about it is Australia’s property market historically, while it’s always been difficult to own property, if you worked hard you could — but if you don’t have family support it is almost impossible to take that first step.”

DFA boss Martin North said Australia’s real estate market was now a “multi-generational disaster” and “a lot of the politicians just don’t get how serious this is and how distorted” is Australia’s property market.

He said the market was being driven by people “who are effectively protected from the rate situation”.

“The RBA is going to have a terrible time getting inflation down because rents are still rising and it means property prices are going to continue to rise relative to incomes, and that means more and more people are going to get excluded and forced into the rental sector where rents are still rising,” he said.

Demographer Bernard Salt says the days when all Australians could dream about home ownership were over.

NSW executive director of the Property Council of Australia Katie Stevenson said “a number of factors — but explicitly an inadequate supply of housing — were conspiring to make much of Sydney all but unliveable for a huge chunk of our population.”

“This has been made clear in recent data showing an exodus of young people across our borders. Prices are going up, and people are getting out.”

Meanwhile, Mr North said in the next three years, the market will be boosted by 356,000 foreign buyers — of whom an estimated 270,000 will pay cash — and another 420,000 migrants, of whom about 200,000 will be paying cash.

Then there will be an estimated 218,000 expats who will return to Australia, some 134,000 of them prepared to pay cash.

DFA estimates 45 per cent of all property transactions in the next three years will be made by buyers who don’t need to borrow money, compared with the roughly 25 per cent cash sales recorded by PEXA in 2023.

Real estate agent Ania Aquino said Sydney property prices meant most first-homebuyers were in their 30s now. Picture: David Swift

It has also estimated the average age of first-homebuyers in Sydney will hit 36 this year, up from 34.6 last year and 25 in 2004.

Nationally the average age of first-homebuyers will this year hit 34, up from 24 years old in 2004.

Demographer Bernard Salt said the nation is at a turning point.

“The cultural issue for Australia is we have seen ourselves, I think for a hundred years, as a nation where everyone gets a shot at home ownership,” he said.

“What is evolving is a clear division where some do, but there needs to be circumstances that enable it, such as household or intergenerational wealth” he said, or to be a “well-remunerated knowledge worker” such as doctors or lawyers.

McGrath real estate agent Ania Auino specialises in the Wentworth Point area, where there is a mix of entry-level units and new luxury waterfront apartments.

She said many buyers were paying in cash: “There are a lot of downsizers that are cashing out from selling large homes that are selling for over $3m and buying luxury waterfront apartments between $1.5 to $3m.”

Ms Aquino said the majority of first-homebuyers she sees are in their early 30s.

“Its reflective of price growth, to get an average apartment in my market it’s about $750,000, there aren’t a lot of mid-20-year-olds that have $75,000 (for a deposit) lying around.”

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