Home seekers without rich parents locked out as $3m inheritances become norm in parts of Sydney

Those without rich parents are getting shut out the property market, with alarming figures showing parents are giving their kids an average of $3m in some suburbs.

House hunters armed with giant inheritances and cash gifts from family members are making it nearly impossible for those not getting financial help to buy property, with new figures showing parents are giving adult children an average of over $3m in a swathe of Sydney suburbs.

The shock number for the first time puts a figure on the growing divide between buyers who are able to inherit a home from their parents and those who cannot.

Experts say the staggering transfer of wealth is driving up prices and creating a growing underclass of those who can’t get on the property ladder.

“If you don’t own a home already, or you’re not related to someone who does, it is very difficult to buy houses in Sydney,” said Finder loans expert Graham Cooke.

It comes as additional Digital Finance Analytics research released this week showed the proportion of first-home buyers getting financial aid from parents had risen to 59 per cent, up from 3 per cent in 2010.

First-home buyers Byron Michalandos and Hannah Fester said they came up against a lot of buyers getting help from parents. Picture: Richard Dobson

DFA data scientist Martin North said the trend was deepening a social divide.

“We have created a two-speed property market, where those with access to family wealth can pay more and bid prices up, whereas those without this leg-up are being excluded,” he said.

Demographics Group co-founder Simon Kuestenmacher said “the big losers” were millennials whose parents can’t help them at the moment for reasons including the rising cost of living.

Figures provided exclusively to The Saturday Telegraph by Seer Data and Analytics estimated that billions in wealth in individual suburbs had already been transferred between generations since 2021.

Much of the wealth passed down to younger generations was thought to come from properties that had been bought decades ago, before subsequent market booms sent the values skyward.

Sydney house prices have doubled nearly four times since the mid-1980s, on average.

First-home buyers say they’re being repeatedly outbid by those getting funded by their parents. Picture: Julian Andrews

The Seer research, commissioned by Philanthropy Australia, forecast billions more would be transferred by 2030, with much of the wealth originating from suburbs across the north shore and eastern suburbs.

This wealth was largely being channelled back into the housing market, often in the form of pumped out deposits.

The study used ABS birth and death rates and reported wealth from equity, shares, income and superannuation to compile an estimate of how much households would pass on and when.

In just the suburb of St Ives, a total $3.6 billion in wealth was forecast to be transferred among generations between 2021 and 2030 – an average of $3.2 million per household.

A similar amount – an average of over $3 million for each household transferring wealth – was forecast for Gordon-Killara, Woollahra and Lindfield, and in the northwest, Glenhaven and West Pennant Hills.

Shannon Reid and partner Stephen Patane said they could push their budget a bit knowing they would get help down the line. Picture: Tim Hunter.

The average transfer in the area of Vaucluse, Rose Bay and Watsons Bay was estimated at $3.7 million, the highest in the country.

Seer CEO Kristi Mansfield said the inheritance research showed there was “deep wealth” being handed down in some places.

“We’re seeing significant housing net wealth due to increasing house prices and increased wealth over the last generation in particular,” Ms Mansfield said.

“Most of that wealth will transfer to older women because we know they usually outlive their husbands, and for the most part, that will then go to their children or family members.”

Mortgage Choice Concord broker Ashley Bieser said most first-home buyer couples had about $100,000-$200,000 in savings to put towards a purchase, which didn’t get them far in Sydney.

“A bit of help from mum and dad can make a big difference,” she said.

Home prices have risen nearly 40 per cent since 2020, creating a rapidly moving target for anyone saving a deposit.

“We also often see couples able to push in to suburbs that are a little on the higher end of their budget knowing they will get an inheritance or gift from their parents coming soon.”

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Parramatta broker Luke Camilleri, who frequently sources loans for first-home buyers, said many of the Sydneysiders actively seeking homes were being funded with early inheritances.

“Most first-home buyers are getting some financial help from their parents these days,” he said. “Often it’s money they would have inherited anyway. The parents figure it may as well be used now, especially if it goes into property, which is seen as relatively safe.”

The amounts parents were providing their children had changed markedly in the past 10 years, Mr Camilleri added. “It’s not just $20k or $30k anymore, it can be well over $300,000,” he said. Ms Bieser noted a recent client who got a $1.2 million cash gift.

First-home buyer Hannah Fester said she was repeatedly outbid at auctions by other buyers that were clearly getting parental help.

“They had their parents with them. Often the dads would bid,” she said. “Our parents don’t have the capacity to help us get over the line. You feel like the money you saved isn’t good enough because they have a bit more than you and can keep pipping you to the post.”

Shannon Reid, with partner Stephen, this week signed contracts on their first home and said simply knowing parental help was available made a difference.

“We’re in our 20s and want to start a family but the options for what you can afford aren’t great,” Ms Reid said. “Knowing we had a bit of extra help coming after our purchase meant we could get something that would actually be suitable for a growing family.”