House prices lose status as the biggest barrier to owning a home

High house prices are no longer the biggest barrier to home ownership, as buyers seek new ways to get a foot in the door.

Some 63 per cent of first homebuyers now receiving financial help from family members, up from 42 per cent in 2023.

High house prices are no longer the biggest barrier to home ownership, new research suggests.

The rising cost of living has overtaken home values as the toughest hurdle for first home buyers, according to a new study by lenders mortgage insurance provider Helia.

Its 2024 Homebuyer Sentiment Report says support from the Bank of Mum and Dad is surging, with 63 per cent of first homebuyers now receiving financial help from family members, up from 42 per cent in 2023.

Helia’s survey of 3000 aspiring home buyers found that 54 per cent say “cost of living” is their biggest barrier to buying property, the first time it has been higher than “housing affordability” (43 per cent).

Deposits are taking much longer to save, more people are working overtime and second jobs, many are cutting back on spending, and others make compromises such as considering properties in outer suburbs or interstate, or smaller homes and apartments.

Helia chief commercial officer Greg McAweeney said inflation had been a “critical issue” for Australians over the past two years, with food and utilities rising significantly.

“These price increases are being felt nationwide, irrespective of location, whereas increases in housing prices vary depending on the area,” he said.

“As everyday expenses continue to grow, saving for a home deposit can become increasingly difficult, especially if house prices are rising faster than you can save for a deposit.”

Helia’s study found that despite rising costs, seven out of 10 home buyers still believe now is a good time to buy, but a majority feel they lack understanding about financial options.

Mr McAweeney said buyers were becoming more savvy, seeking support from government incentives, parents where available, and lenders mortgage insurance (LMI).

Alecto Finance mortgage broker Peter Kennedy said he spoke with many parents about the role they could play in helping their children into housing.

“I also talk a lot about the need for financial tough love to the kids who seek this support and putting in place clear parameters and an agreement,” he said.

“It may be a gift or a loan to help them into the market but all parties need to feel comfortable that if circumstances change there is a safety net for Mum and Dad if they need to access the capital.”

For some buyers, the Bank of Mum and Dad was “simply not an option” but other alternatives were emerging, Mr Kennedy said.

This included an evolution in lenders mortgage insurance, which “was for a long time seen as just a nasty lump sum premium added to a loan”, he said.

Greg McAweeney, chief commercial officer at Helia

Peter Kennedy, mortgage broker at Alecto Finance

“That has definitely changed. Firstly, as a mortgage broker and property advocate, I can see the advantage of getting into a market sooner rather than later as it is so hard to outrun property prices.

“So, let’s say the LMI costs 1-2 per cent of the purchase price and the property grows at say 5 per cent, you can see that paying an insurance premium could be advantageous.”

Mr Kennedy said soaring energy bills had been a big issue for consumers, and he had seen car and personal loan repayments become unmanageable as interest rates increased.

“It’s important for future buyers to review where savings can be made and reduce outgoing costs where possible,” he said.