As houses get more expensive, first home buyers are getting older

The average age of first home buyers has increased rapidly, adding to concerns that more people will be locked out of the housing market and paying rent into their retirement.

While nationally the age has been on the rise for at least the past two decades, the increasing age of first home buyers in Sydney and Melbourne, in particular, is concerning experts.

Harrison Khannah is only 24, but with house prices rising, he does not want to leave homeownerhip too much longer.Credit: Dion Georgopoulos

Figures from Digital Data Analytics show that first home buyers in Sydney and Melbourne are in their mid-30s, on average. In 2004, they were in their mid-20s. The typical mortgage term was 20 years; now it is 30 years, with 35-year and even 40-year terms also available.

Social researcher and founder of McCrindle Research, Mark McCrindle, says while the aspiration for home ownership among younger people remains strong, turning the aspiration into reality will be difficult for many.

The average two-income household in Sydney, for example, would find it hard to get a start, which is why we are seeing more parents helping out, McCrindle says.

Those lucky enough to get help from their parents would most likely be in their 30s as most parents would likely not be able to help until they themselves are in their 60s, he says.

‘We are likely witnessing the beginning of the end of the ‘great Australian dream’, where almost everyone had a realistic prospect of affording a home.’

Andrew Wilson, chief economist at My Housing Market.

Harrison Khannah is hoping to buck the trend. The 24-year-old software engineer is fed up with paying someone else’s mortgage and has had to move four times since he left home five years ago.

He would like to stay in Sydney’s inner west, where he rents. Given the size of the mortgage and repayments he will be taking on, he is prepared to make sacrifices. He is almost always the youngest person at open houses, with many people in their 30s.

Real estate agents, who are more used to dealing with potential first home buyers who are older, sometimes do not take Khannah seriously and talk down to him, he says. If prices were stable and rents not rising, he would likely wait longer.

“I want to grab a place now before prices go even higher; I feel like it’s now or never,” Khannah says.

The upward march of the age of first home buyers continues despite more parents helping their children into the market and the first home buyer incentives of the states and the federal government.

One of the primary drivers is the rapid growth of house prices.

CoreLogic figures show prices at the 25th percentile, the value below which sits the lowest quarter of prices where most first home buyers buy.

For dwellings in Sydney in January this year, the 25th percentile was $821,000 compared to 20 years earlier when it was $356,000. In Melbourne, houses at the 25th percentage were priced at $604,000 compared to $242,000 two decades ago.

These are nominal prices but the increase after accounting for inflation is still substantial. First home buyers have to save larger deposits as prices rise, on top of rising rents.

However, there are other factors alongside higher prices driving the trend of older first home buyers, says Andrew Wilson, the chief economist at My Housing Market. More people are in higher education and are partnering later, which matters, as it usually takes two incomes to service a mortgage in Sydney or Melbourne, Wilson says.

“The capacity to support a mortgage has hit its dual income limit for first home buyers, and there is undersupply of new housing,” he says. More time spent paying high rent means less capacity to save for a deposit, Wilson says.

“We are likely witnessing the beginning of the end of the ‘great Australian Dream’, where almost everyone had a realistic prospect of affording a home”, Wilson says.

Buying a house, as opposed to a unit, is becoming even more difficult for first home buyers in our biggest cities.

CoreLogic figures show at the onset of the pandemic in March 2020, the house premium, or the difference between median capital city house and unit values, was just 16.7 per cent. Because of the scarcity factor and the desire for more space, it is now 45.2 per cent.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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