By Mark McCrindle, Social Researcher, Demographer and Principal at McCrindle
We’ve often been told by our parents to get into the property market as early as possible, as history has shown that property prices have risen dramatically over each decade.
But how does each unique generation look at the idea of buying property? There are vast differences between the attitudes of the baby boomers to Alphas and Millennials.
What can we learn from each generation about how their thinking has shaped the property market?
The Australian dream of owning a home remains a compelling aspiration across generations. However, the landscape of property ownership has dramatically shifted, posing challenges and reshaping perspectives from Baby Boomers to Gen Z. Below is a glimpse into how each generation approaches property, mortgages, preferences, fears, and aspirations, all significantly influencing Australia's housing market.
Attitudes of each generation
Australia's oldest generation, Baby Boomers, hold a substantial financial advantage, with their share of the nation’s private wealth twice as large as their share of population. In other words, their economic footprint is twice the size of their demographic one. In 1984, when they initially entered the housing market, the average annual full-time earnings stood at $19,5161, while the average property price for capital cities was just $64,0392, only 3.3 times the average annual fulltime earnings. Fast forward to today, and while the average adult full-time earnings have soared to $94,0003, the average capital city house price has accelerated at a faster rate and and is now a striking 11.4 times the average annual full-time earnings.
Despite the financial challenges, it is Australia’s youngest generation driving the momentum of continuing the Australian Dream of owning their own home. More than three in five Gen Z’s (63%) top hope in life is to own their own home4. Amidst the impaired affordability of today’s modern housing market, Gen Z’s desire for homeownership is echoed in their fear of never be able to buy their own home (47%)
Gen Y and Gen X are channelling their financial aspirations into other avenues, with 59% of Gen Y and 66% of Gen X aspiring to achieve complete financial freedom and independence, shifting their focus away from homeownership.
With young generations either hurdled by purchasing a home or turning their financial aspirations elsewhere, data from The Australian Institute of Family Studies (AIFS) shows two in five (43%) young adults aged 20-24 were still living at home in 2016, up from 36% in 1981 5.
It is not only those in their early 20s either. The portion of 25-29-year-olds still at home has also grown over time. In 1981, 10% of 25-29-years-olds lived in the family home, compared to 17% in 2016.
The rise in 20-somethings living in the family home can in part be attributed to the rising cost of living. Whether young people today rent or own their home with a mortgage, moving out of home can be a costly experience. Australia’s rising cost of living combined with the fact that younger generations today are also investing more in education is further delaying the ‘movingout-of-home’ life-marker.
However, all hope is not lost as the households of Baby Boomers (aged 60+) currently own a combined $4.5 trillion. Over the next two decades, while some in this age group will still be increasing their net worth, others will be spending theirs down. It is estimated that over these next two decades, at least $3 trillion of this, much of it in property, will be passed on to their children. Therefore, the decades ahead will see the biggest inter-generational wealth transfer in Australia’s history and many of the younger generations will be the main beneficiaries.
House types
House type preference also largely differs across the generations. Baby Boomers who were provided with a vast array of options set the precedent for a quarter-acre block with a lawn and driveway for the car as the ideal home. Now, with diminishing room in popular locations and capital cities being squeezed for available housing options, younger generations are looking to other alternatives. Gen Z and Gen Y are often starting their property journey in apartments and townhouses for both affordability and availability reasons. Considering the minimal price difference on a ready-to-move into apartment, compared to a house at the same price but in a regional area and in need of some renovations, young Aussies are steering away from the original ideal of a house on a block of land.
Others, however, are looking beyond the densified urban centres, opting for a sea-change or tree-change. That is, moving out of the capital cities to a regional destination to snap up a more affordable home.
Social gap
High housing prices, coupled with stagnant income growth, has proven to be a significant hurdle for purchasing a home. As a result, many are prolonging the milestone of moving out of their family homes due to the soaring cost of living further delaying their ability to enter the property market independently. For some, to enter the market at all, the bank of mum and dad has become a crucial stepping stone for many young adults, as they often rely on financial support from their parents to secure their first home.
So the once standard pathway to Australian dream of home ownership has become more of a challenge but with different strategies, and the right support, not unattainable. Even over the decade ahead, particularly with the support of the downsizing Boomer grandparents and the wealth accumulating Millennial parents, the opportunity to own a home and participate in local community life will remain a viable pursuit of today’s emerging generation.
References:
1 Australian Bureau of Statistics 1985, Average Weekly Earnings, Australia, Dec 1984, cat. no. 6302.0, ABS, Canberra.
2 Abelson, P & Chung, D 2006, The Real Story of Housing Prices in Australia from 1970 to 2003, Macquarie University.
3 Australian Bureau of Statistics (2023). Average Weekly Earnings, Australia. Retrieved from Quarterly Media Releases from https://www.abs.gov.au/statistics/labour/earnings-and-
working-conditions/average-weekly-earnings-australia, Chung, D., & Abelson, P. (2004). Housing Prices in Australia: 1970 to 2003. Retrieved from https://mccrindle.com.au/app/uploads/images/Abelson_9_04.pdf
4 Uncovering the aspirations of modern Australia (2023). Financial Freedom Report. Retrieved from chromeextension://efaidnbmnnnibpcajpcglclefindmkaj/https://ioof-p- 001.sitecorecontenthub.cloud/api/public/content/insignia-financial-financial-freedom-report.pdf.
5 Australian Institute of Family Studies 2019, More young adults living at home with their parents, Median Release, AIFS, Australian Government.
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