Crazy sums parents are giving kids in cash gifts

New figures show the insane sums parents are leaving their kids and why it’s horrible for anyone who wants to buy a home.

Getting a good job and saving hard used to be the best path to climbing the Aussie property ladder, but now it’s more about how rich your parents are and where they bought their home.

Alarming new figures have revealed home seekers are increasingly relying on the bank of mum and dad and jaw dropping inheritances to get their slice of the Aussie dream.

Digital Finance Analytics research released this week indicated the share of first-home buyers receiving funding from family had risen to 59 per cent, up from 3 per cent in 2010.

It’s become more important to get help from parents because of soaring prices. Picture: Thomas Lisson

It echoed the findings of a McCrindle report that found almost two-thirds of Australians believed most young people could only enter the property market with financial support.

Inheritances are averaging over $2m in many capital city suburbs, additional research from Seer Data and Analytics found.

The data also revealed the suburbs in each capital where inheritances were the largest, including surprise areas in Brisbane, a range of Adelaide areas and a big chunk of Darwin.

The suburbs where the average inheritances were the largest – close to $4m – were in Sydney, along with parts of inner Melbourne.

Much of the wealth being passed down was reported to be originating from the family home due to decades of soaring property prices pushing the values into the stratosphere.

And those who don’t have access to this wealth are increasingly being left out in the cold, experts have warned.

“There’s a lot of privilege that comes from having parents who own property,” said Finder.com.au home loan expert Graham Cooke.

The bank of mum and dad is propping up the housing market.

“The biggest challenge for most home buyers is getting together a deposit while prices continue to rise. And it’s not surprising this is what most parents provide help with. Those who can’t get this help can struggle.”

A new social divide in the housing market

Digital Finance Analytics principal Martin North said buyers lucky enough to get help from their parents were often pushing out those who were going it alone.

“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 told The Courier Mail.

“This is a classic policy failure due to 20 years plus of poor Government policy.

“Prices have been stretched thanks to government policy like first-time buyer subsidies and tax breaks, plus weak lending controls and high migration.

Demographer Simon Kuestenmacher said cashed up parents were making the housing crisis worse. Picture Glenn Hampson

“This explosion in asset prices means people have to pay more for somewhere to live, but it enables people already owning property to pass down some of their equity via the family bank.”

Where inheritances are the largest

Seer Data & Analytics co-founder and CEO Kristi Mansfield said the inheritance research showed substantial wealth was set to be handed down to younger generations.

“There’s deep wealth to be transferred in some places you wouldn’t imagine, and what this is highlighting is really how much wealth there is across many suburbs and states,” Ms Mansfield said.

Seer used ABS statistics such as birth and death rates, age groups and net household wealth from equity, shares, income and super to estimate when households would pass on wealth.

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

See the suburbs with highest average inheritances

> Sydney

> Melbourne

> Brisbane

> Adelaide

> Darwin

Prices continue to rise

It comes as PropTrack research showed Australian home prices are expected to rise by up to 5 per cent by year’s end, building on the growth of 2.7 per cent already seen from January to May.

Prices are expected to keep rising this year.

Prices are also up nearly 40 per cent since the pandemic hit in early 2020, according to PropTrack.

Anyone saving a deposit during this time would likely have struggled to keep up with the rises given the comparatively slower growth in wages over the same period.

Prices were expected to keep growing even if the Reserve Bank decided to increase the cash rate again due to higher than expected inflation figures revealed in May.

PropTrack director of economic research Cameron Kusher said growth would despite higher interest rates because buyer demand still outstripped supply and new homes weren’t getting built fast enough.

Why parental help is so vital

Loan Market broker Youeil Shol said first-home buyers getting help from a parent was a way to overcome current challenges.

Stubborn inflation means RBA governor Michelle Bullock may have to announce more interest rate rises. Picture: Martin Ollman

“Getting a deposit together is harder than ever. They’re trying to save amid a cost of living crisis and rents have gone through the roof – they have to make big sacrifices or find alternatives,” he said.

“Support from parents, in the form of a gift, is a common way for them to get their deposit together.”

Demographics Group co-founder Simon Kuestenmacher said home buyers receiving assistance from the bank of mum and dad were making the housing crisis worse.

“We know this is driving up prices and makes it even less likely for asset-poor people to buy a house,” he said.

How parents can help their kids

Experts warned parents considering providing help to their children first review whether they were on track to meet their retirement objectives.

Parents also needed to make sure they had adequate cash for emergencies and how providing financial help would change their mortgage balance or lifestyle.

Australian Unity executive general manager of life and super Adnan Glinac told the Herald Sun it was recommended aid only be provided where the adult children were able to keep up with the repayments.