Australia
FEATURE
'No one wants their parents to die': The home buyers waiting on their inheritance
Young people desperate to buy a home are looking to inheritances to fund their purchases, as Australia faces the greatest wealth transfer in its history.
Many young people expect to rely on their inheritance in order to own property. Source: SBS News
Ari Sharp is one of the lucky Australians who is not obsessed with house prices — her parents already own four properties that she knows she'll inherit one day.
The 30-year-old single mother from Victoria can't afford to buy her own home but knowing an inheritance is coming has eased the financial pressure.
"It's taken the edge off the need for security in buying a house of my own, separate to whatever the rest of my family owns," she told SBS News.
Advertisement
It has also given Ari the freedom to explore career paths that are not necessarily financially lucrative.
"I've had the freedom to explore things that I actually want to do," she said.
Ari is one of many young Australians who feel increasingly locked out of the housing market and believe they may have to wait for their inheritance in order to own property. Many are openly discussing this possibility with their friends and family.
Analysis by University of NSW professor Hal Pawson found house prices in Australia had tripled between 1990 and 2020, while real earnings only increased by 50 per cent.
House prices in Australia have tripled while wages have only increased by 50 per cent. Source: SBS NewsNSW resident Alan, who did not want to use his real name, said he felt "terrible" that he was now relying on his inheritance to own property.
The 43-year-old blames "laziness and stupidity" for not buying his own place earlier as he was busy raising two children and also lost money due to a recent divorce and issues with a dodgy workplace.
He says his inheritance money is always in the back of his mind now when he sees his mum.
"You know the only way you'll get your inheritance is if that person in front of you — who you love — dies," he told SBS News.
"How would that make you feel? Because that's how I feel and it's pretty rubbish."
'No one wants their parents to die'
Sydney resident Alison, who also wished to remain anonymous, said she felt "dejected" after calculating it would take her 27 years to save the deposit for a median-priced house in Sydney — which is around $1.5 million.
Even though the 22-year-old — who earns $75,000 a year — has plenty of time to save, she has started to think about her inheritance.
"[I started to think] the only way I'll ever be able to afford a house before the age of 50 is [if] one of my parents dies and I get an inheritance," she said.
While Alison acknowledged there were other options — such as buying a unit, which would be cheaper — she said her parents bought a house when they were her age without having to save for almost 30 years.
[I started to think] the only way I'll ever be able to afford a house before the age of 50 is [if] one of my parents dies and I get an inheritance.Alison (not her real name)
"The thing that sucks is that no one wants their parents to die but for a lot of people in my generation, getting an inheritance is going to be the only way many of us will be able to afford a home," Alison said.
"It's just awful that people can't afford to own a house without having to rely on inheritance ... I think it's unfair and it makes me really upset."
Get set for the great wealth transfer
Griffith University researchers estimate Australians are set to inherit an estimated $3.5 trillion over the next 20 years, in the greatest wealth transfer in the nation's history.
On average, each recipient is expected to inherit around $320,000.
Andrew Inwood, global chief executive officer of market research company CoreData, described baby boomers as "the wealthiest generation that have ever existed".
Australia's four million boomers, generally considered to be those born between 1946 and 1964, are estimated to hold around $4.9 trillion in wealth, according to CoreData analysis.
The wealthiest 2 per cent, consisting of 78,300 individuals, were estimated to have an average of around $2.6 million in assets each, according to modelling done in November 2023. The rest had around $400,000 each in assets.
Baby Boomers hold $4.9 trillion in assets according to CoreData analysis. Source: SBS News"[Boomers are] moving into retirement relatively rapidly. The youngest [are around] 60," Inwood told SBS News.
"[This money is] going from being saved and stored, to being spent and then passed on ... to the next generation."
The money this generation will leave behind could drive significant change in Australia's economy and housing market.
For those who are in line to inherit, this is welcome news, and many Australians are already changing how they live with this in mind.
Inheritance could push up property prices
Experts believe the trillion-dollar wealth transfer could drive property prices even higher.
A 2021 Productivity Commission report on wealth transfers in Australia predicted the value of inheritances could increase fourfold within 20 years, as household wealth grows and the population ages.
In 2018, an estimated $120 billion was passed on through wealth transfers - including $107 billion in inheritances and $13 billion in gifts - more than double the amount in 2002.
The amount far exceeded the Australian government's entire expenditure on health, which was $80 billion in 2018/19.
READ MORE
Here's how Australian housing market performed last year and what you can expect in 2024
Estimates show the value of the average inheritance rose from about $85,000 in 2001/02, to $125,000 in 2018/19.
The median inheritance was just $45,000 in 2018/19, meaning most people got less than $50,000.
Studies have found that receiving a wealth transfer is linked to higher rates of home ownership.
Johnathan McMenamin, a senior economist at financial services company Barrenjoey, believes the incoming wealth transfer will make it harder for those without access to family money to buy a house.
"Unfortunately there is a very low level of supply of housing at the moment and so when your marginal buyer in the housing market has access to inherited wealth, then the price of that house can lift quite substantially," he told SBS News.
When your marginal buyer in the housing market has access to inherited wealth, then the price of that house can lift quite substantially.Johnathan McMenamin, Barrenjoey senior economist
If governments do not make any other changes to housing policy, Inwood agrees inheritances could lift property prices, or at the very least they could keep prices high.
He said there had already been a "noticeable trend" among older baby boomers who had died, of giving their money to their grandchildren instead of their children in recognition of how difficult it is for them to buy a house.
"[The grandchildren] are the ones that need the most help because asset price inflation has really impacted their ability to get housing," he said.
'Choices will be framed' around inheritance
Monash University professor of youth studies Lucas Walsh said the expectation of an inheritance was "warping the plans of young people".
"Planning to have an inheritance will actually affect the social fabric of Australia moving forward because choices will be framed around this idea that one will get money," he told SBS News.
Waiting for an inheritance could also impact other life choices such as when to start a family and how young people navigate their early years in the workforce, he said.
Planning to have an inheritance will actually affect the social fabric of Australia moving forward because choices will be framed around this idea that one will get money.Professor Lucas Walsh, Monash University
But he added that there were also downsides to waiting for an inheritance, which is not guaranteed and could be decades away at a time when the housing market may have changed.
Ari knows her inheritance is not guaranteed but believes she will deal with that in the future if she has to.
"Anything could happen, illness could happen, disability could happen — anything that requires [my parents] to use their assets," she said.
Ari Sharp with her daughter. Source: Supplied
Help can come with 'emotional baggage'
Simone (not her real name) is also relying on her parent's generosity but wishes she didn't have to.
Her mother owns three properties and Simone is currently living in one of these in Queensland with her two children.
"There's a lot of emotional baggage that comes with it all so as grateful as I am, it's also frustrating at times," she said.
READ MORE
Some may consider my inheritance measly. For me, it meant everything
Simone said it was often "tricky" to deal with the strings attached to living in her mother's house. Her mum makes suggestions about improvements she wants on the property, or offers comments discouraging Simone from buying her own place. They have a difficult relationship as her mum also has an alcohol addiction.
"If the tables could be turned and I could just have a happy family, I would prefer that over any property," she said.
If the tables could be turned and I could just have a happy family, I would prefer that over any property.Simone (not her real name)
But the fact that Simone is paying below-market rent and doesn't have to save for a house deposit means she can spend money taking her children out to theme parks and other activities. She can also rebuild her savings after a short period of unemployment.
She feels bad for others who don't have something to fall back on.
"[It] would be really hard in the current situation, especially with the rental crisis," she said.
Will the wealth transfer make inequality worse?
The Productivity Commission does not believe inheritances will worsen inequality in Australia because even though the dollar value of assets wealthier people receive can be high, they make up a lower percentage of their existing wealth.
Productivity Commissioner Lisa Gropp said people were on average around 50 years old when they received an inheritance and this limited their impact. Gifts given earlier in life also tended to be smaller in value.
She said intergenerational wealth persistence could be mostly attributed to other things parents give their children, such as "education, networks, values and other opportunities".
READ MORE
'Creates a class system': How inheritances are shaping decisions of young Australians
But Walsh disagrees and is worried inheritances could make inequality worse because certain groups — such as those who leave school early, have a disability, live in a regional area or are from an Aboriginal or Torres Strait Islander background — tended to fare worse than others across time.
"The wealth transfer could have significant implications for divisions within class — those who are in property and those who aren't," he said. "And young people are acutely aware of this."
'Giant slog' for those not able to rely on parents' wealth
Nate Pedrotti, 27, is one of the many Australians with no inheritance to look forward to.
He said his dad was in debt and he's not on good terms with his mum. His girlfriend is also not expecting to receive anything.
The couple wanted to buy a three-bedroom place as they have three cats and also work from home but their $450,000 budget wasn't enough. Even a townhouse in the northern Melbourne suburb of Reservoir was around $800,000.
"The deposit is nearly impossible to save up for when you're renting, and then the mortgage repayments as well are just through the roof," Nate said.
Nate Pedrotti does not think he'll be able to buy a house anytime soon. Source: Supplied / Charis ChangHe said the couple had "kind of given up" on buying property in the near future.
"It's going to be a giant slog and probably impossible anyway," he said.
They are now looking to invest in index funds and other products that could give them a higher return on their savings.
Since resigning themselves to being renters, Nate said the couple had not been saving as aggressively and were prioritising other things like travel.
"It's made me very nihilistic and think, 'Well, what's the f---ing point?' Because I'm not going to get there anyway. And if I do, I'm going to have to give up every skerrick of pleasure and enjoyment in my life, and what's the point in that?
"I think it's very, very unfair [and] I don't feel like I have any way of changing it."
SBS News's post
SBS News
·
More and more home buyers are waiting on their inheritance to fund their property purchases, as Australia faces the greatest wealth transfer in its history.
Read more: https://trib.al/8LP2w4R
All reactions:474474
360 comments
165 shares
Like
Comment
Share
All comments
Rianne Albiston
And yet we'll still see boomers talk about how hard it was buying a house back in their day, despite the graph being so bleeding obvious that it's harder now to buy a house because our wages remain stagnant while house prices keep rising. We couldn't afford our home without financial help from family, in the form of a flexible, interest free loan. Very fortunate my grandfather set up a trust fund for the family before he passed away to allow us to do this. We have enough income to pay the mortgage and loan, but saving up the deposit and then the stamp duty and other fees is very difficult to do when house prices are continuously rising. And then most younger people have a HECS debt which also affects borrowing power, and with the indexation on that, any payment we make throughout the year makes no difference to the amount we still owe - the older generations had free tertiary education. Then on top of that you have cashed up investors snapping up a lot of the affordable properties from first home buyers because of negative gearing brought in by LNP. The whole system is broken. Not buying some avo on toast or a few coffees a week is not going to make any difference, and it's hilarious to think that was the advice from the LNP government cronies, instead of them addressing the actual problems. And now Labor is left to pick up the pieces post covid with all the difficulties that came from a global pandemic. An impossible situation stuck between a rock and a hard place.
2 d
Like
Reply
17
View all 5 replies
Cameron Nichol
And when did it start taking off? When Howard brought in tax breaks for affluent middle class investors. Until the tax breaks are shifted exclusively to new build rental properties nothing will change.
2 d
Like
Reply
36
View all 3 replies
Paul Spray
What about monthly mortgage repayments indexed? Higher interests verse lower.
Should also look at household income, not just wages. Many households are now dual
Income not single. It is sad to think though that greater female work force participation may have resulted in those wages going to pay higher mortgages
2 d
Like
Reply
23
View all 14 replies
Romy Brown
Should have brought a house back in 2000. Alas, I was 8 and in primary school. But maybe that's where I went wrong
2 d
Like
Reply
86
View all 5 replies
Andreas Brust
Don't lament the situation...vote for the party that would do something about it. I know the 2 party system is hart to crack. But I beleave more then 50 % is not happy with this . Vote not for the status quo and things might change. ..this is a obvious problem since many years..it's not new
2 d
Like
Reply
31
View all 14 replies
Holly Amelia
Now add a line of average house size per sqm and another for "fancy inclusions".
Than add another for world wage increases. Third world standards of living - who often supply the materials for our housing industry, have also increased (as they shouls).
There are more factors than just tax loops that have increased prices.
2 d
Like
Reply
View 1 reply
Kerry Clifford
The only real solution is to increase public housing to such an extent that housing as a business investment collapses.
2 d
Like
Reply
64
View all 5 replies
Graham Smith
We've all known about this for decades, but the big money i.e. the banks are making profits out of it.
1 h
Like
Reply
Leachim Schlueter
I bought a housing trust home when younger . It was not easy for me . At that time in history the government of the day got the housing trust in south Australia to do a massive building program . We need governments to do some big subdivisions and build lots of housing to sell to people at a fair price . I believe people should buy their homes
2 d
Like
Reply
Jason Gultjaeff
Wow, and I thought I was exaggerating when I say house prices are increasing exponentially in Australia....
Happy days in Australia and smiles all round. For some.
2 d
Like
Reply
13
View all 12 replies
Manda Reggae
The wealth transfer will work for some but there are plenty, like me, who won't inherit anything. I've had to make my own way in life
2 d
Like
Reply
11
View 1 reply
Stew McAllister
The reason why homes were cheaper as a comparative to today is less regulation,
By the time you calculate interest, rates, maintenance, your return on property is 10%,
That is the increased cost of regulation on the housing market,
Shortage of housing will get a lot worse before it improves or if it improves
2 d
Like
Reply
Barbara Hatch
thats ok for parents that own one or more homes but many women and men after divorce have rental only
2 d
Like
Reply
2
View 1 reply
Macgregor Ross
come on young people: start breaking things
2 d
Like
Reply
19
View 1 reply
Kurtain Brerr
Tax them 60% inheritance tax and let’s get that money back in the economy!
2 d
Like
Reply
14
View all 11 replies
Tam English-Martin
There is more to housing affordability than the simplicity of comparing to incomes over time.
How about, instead of individual wages, they look at 'household income '... in comparison to house prices.
As, when houses were more in line with incomes, it was common that there was only one income earner per household. Or one full-time and a part-time at most. It would be interesting to see the statistics on 'household' income.
It only makes sense, when people pool their income together, they can afford to pay more than a single income household.
Also, look at the ages people start to have children. Starting later, gives opportunity to actually have more than one wage earner, as well as those extra years to save for a bigger deposit = better bargaining power with banks to secure a home loan.
All factors which can force prices up.
2 d
Like
Reply
Edited
View all 4 replies
Derek Osborne
But there is no inheritance because seniors are running down their capital to survive. So we remain enslaved to institutions for ever
2 d
Like
Reply
5
Edward Chan
An inheritance is not a right, it’s for the privileged
2 d
Like
Reply
8
View 1 reply
Sue Mureau
There's a lot of people out there waiting impatiently for their parents to pass. And there are many making aged care decisions for parents that are not always in their parents best interest.
As a care manager in aged care, it doesn't take long to start losing faith in 'families'
1 d
Like
Reply
Amy Schutt
Homes are a supply and demand issue. With record immigration levels, demand exceeds supply. Not enough for our own
2 d
Like
Reply
4
View all 12 replies
Matthias Lichtenstein
Funny how it perfectly coincides with the fast transition of dual income households from single income households after the mortgage stress of the 80s. Then we had lots of disposable household income after the interest rates went back down in the 90s... "What are we going to do with all this extra money?? Let's buy an investment property!"
The single biggest reason for an unseen before property market explosion. Now you NEED 2 incomes. The good times are over.
2 d
Like
Reply
4
View all 2 replies
George Olsen
Seems to be a correlation with the LNP getting in power?!
2 d
Like
Reply
11
View 1 reply
Pushpa Srinivas
Those who bought houses in the 80's, 90's or even in the 2000's are lucky, now it is so tough for the youngsters with two incomes. Cost of living, house prices, mortgage payments & rents have just skyrocketed.
2 d
Like
Reply
6
Milos Nikolic
The French knew how to deal with this kind of stuff back in the day.
2 d
Like
Reply
24
View all 3 replies
Andrew Worthington
Too bad their parents are off on SKI (spending the kids’ inheritance) hols and tours and buying themselves into lavish retirement homes. And life expectancy getting ever longer…
2 d
Like
Reply
6
Debbie Pasfield
Pure greed. Ouver priced homes. Next generations will suffer. Once you could buy a decent home , a car, have a holiday and kids at school on one medium income worker. Now we are 2 parents working. One may have 2 jobs and struggle to make ends meet. Good luck to next generations. Thanks to pure greed. Not acceptable.
2 d
Like
Reply
Edited
3
Karl Leung
Remember this: John Howard introduced the capital gains discount for housing and other reforms in 2000. Then look at the graph again.
Also remember John Howard wanted to get rid of Super in the late 90s.
Sure, Labor is far from perfect, but never get tricked into voting Liberal.
2 d
Like
Reply
Edited
29
View all 3 replies
Alex Grimes
Gee, I wonder what policy changes happened in the early 2000s?
2 d
Like
Reply
7
Ellen Mc Nally
is sbs suggesting there are houses to be bought for under 350k in Australia where people earn 140k? Where? Im ok with not even being able to earn 140k, if you can work, earn a reasonable income and buy a house for 350k where there is affordable living and people and its not a caravan park
2 d
Like
Reply
Errol Laggner
Thanks to the LNP, Howard didn't care anyway.
2 d
Like
Reply
11
Robert O Briain
Why is the data 5 years old? I would like to see a graph that goes to 2023, I would imagine it's gotten a lot worse since 2019
2 d
Like
Reply
Edited
21
View all 2 replies
Sean Davis
How is it that inflation index hasn't taken into account the massive increase in one of peoples greatest costs. Hence dramatically increasing the gap between wages a property prices. Is the inflation index broken, if inflation had increased as housing had gone up, would that not have naturally curbed housing prices soaring. Is the index rigged so as to keep inflation low, and hence wages artificially low??. A design by the LNP when John Howard broke how housing would be measured for inflationary purposes.?? You can see where Johnny's policies started to have an effect in 2000 and onwards.
2 d
Like
Reply
Edited
13
View all 10 replies
Bill Stevens
Now, I wonder what happened around the turn of the century.
2 d
Like
Reply
View 1 reply
Jacky Dorise
no one mention negative gearing is part of problem too ! greedy landlords greedy banks greedy councils greedy real estate agents who have overinflated the prices !!
2 d
Like
Reply
Peter Cope
All the big climbs mostly in Liberal terms of office…basically closing the door on the next generation housing affordability…”better economic managers”….yea right…you cant blame 2 yrs of a Labor govt on 9+yrs of LNP housing policy.
2 d
Like
Reply
Edited
9
Jesse Xu
Don't worry. When a proper person get in govt they'll just tax everyone who owns property 50% of the net asset worth and handing it to ones that do not own. That'll solve it
2 d
Like
Reply
Rae Oneill
Years of LNP.
2 d
Like
Reply
15
Kathryn O'Sullivan
So you're saying that giving up avocado toast is not going to cut it anymore?
2 d
Like
Reply
5
Scott Wilson
All by design. People need to realise that
2 d
Like
Reply
8
Byron Ward
Pretty sure a takeaway coffee here and there won’t make up that difference….
2 d
Like
Reply
18
View all 3 replies
Pat Walsh
Howard years . We are screwed because he made cgt exemption, them allowed superfunds.
2 d
Like
Reply
Richard Berndt
Thanks John Howard for halving the CGT and turning housing into an investors party since 2000.
2 d
Like
Reply
5
Patrick Saccani-Williams
Gee, I wonder what happened just after Howard's election?
2 d
Like
Reply
19
View all 6 replies
Dejan Nikolin
“You will own nothing and you will be happy”. First part is coming along nicely…
2 d
Like
Reply
5
View 1 reply
Nick Costello
The "wealth transfer" has been going on for a long time, and it involves fas more than a generational shift.
Economists and politicians have been pretending to control inflation for decades while they have actually been driving it.
Back in the 1970s and '80s, they were actively encouraging cashed up Australians to invest in offshore industries while our own manufacturing sector was left to rot, and in the years since then they have been covering their tracks by hiding the true extent of unemployment to prevent a loss of public confidence in investment.
That has led them to drive the promise of everlasting protection of property values at the expense of the redundant workers who have been discarded. The rapid rise of poverty and homelessness is no accident.
Today, with even two income households struggling to stay afloat, they will pay lip service to struggling Australians while milking the monster they have created for all its worth. They could slow things down to make a correction, but that would reduce the flow of cream to the top, so all we can look forward to is more "incentives" for the rich, more invitations to foreign investors, and more people joining the merry go round of the welfare warehouse.
Sadly, few people have questioned the trajectory towards collapse because most have feared being left behind. That has created a culture in which it has been acceptable to screw over your neighbour, and I shudder to think what might happen if we don't start looking after each other very soon
2 d
Like
Reply
Ric Seeber
Free market outcomes.
Something to be proud about.
2 d
Like
Reply
Harry Pasfield
Wonder how that graph would compare with the difference between wealthy and poor people
1 d
Like
Reply
Joe Li Poma
They should of added smashed avocado to the graph too ...
2 d
Like
Reply
Bela Lantos
Which means such high prices are unsustainable!!!!
2 d
Like
Reply
Correna Mazzacca
Steven Lenart should have bought a house in the 80’s when we weren’t born.
some aren’t getting an inheritance, I know I didn’t.2 d
Like
Reply
No comments:
Post a Comment