The ‘Bank of Mum and Dad’
The Australian housing market has, except for a few minor blips, overall been rising for decades.
Even the COVID-19 pandemic couldn’t burst the proverbial ‘bubble’, which is why so many first-time buyers are looking to their parents for support. Here, we explore the state of the market and why the ‘Bank of Mum and Dad’ is so valuable.
How much are parents really investing in their children’s first homes?
According to research by Finder in its First Home Buyers Report 2021, almost one in three (or 32%) first home buyers have been financially supported by their parents. About a quarter of those surveyed (23%) received help for either the deposit or loan repayments, while 12% were assisted with the full purchase price.
So what does this make the ‘Bank of Mum and Dad’? Only the ninth-largest mortgage lender in the country! In the past 12 months, parents have forked out a whopping $29 billion to help their children get into the property market.
This may not come as a shock to those familiar with housing prices. Home loan expert Sarah Megginson revealed that “house prices in Australia increased by 2.8% in March alone, the fastest rate of appreciation since October 1988”. With income rises nowhere near comparable with housing-price rises, it’s no wonder parents are assisting their children into the market.
The number of first home buyers is growing
Whether it’s due to FOMO or simply an acceptance that house prices will likely not drop significantly any time soon, there are more first home buyers today than since the global financial crisis. According to the Australian Bureau of Statistics, “In November , the number of owner-occupier first home buyer loan commitments rose 3.1% to reach 13,905 (seasonally adjusted), a 42.5% rise since the start of the year.”
This rapid growth hasn’t been seen since October 2009, when the government’s stimulus package included a temporary tripling of the First Home Owner Grant. And we’re certainly seeing more first home buyers on the ground at open homes in Toowoomba.
Alternative options available for first home buyers
While many young people are taking advantage of their parents’ generosity in purchasing a home, experts say they shouldn’t rely on the ‘Bank of Mum and Dad’ to always come to the rescue, and instead there are other ways they may be able to finally land that first home.
There are various grants and schemes across every state and territory, and budding home buyers should look into which avenues will best suit their needs. Some of the most popular include:
- First Home Owner Grant (FHOG): Each state and territory has different regulations around the FHOG, so make sure you are aware of all the rules and how you may be eligible. The Queensland FHOG, for example, offers $15,000 on properties valued below $750,000.
- First Home Loan Deposit Scheme (FHLDS): In the latest Federal Budget, Treasurer Frydenberg announced the FHLDS (New Homes) would be extended and a new Family Home Guarantee would be established. There will be an additional 10,000 places made available for the New Homes scheme for the 2021-22 financial year, while the Family Home Guarantee (a similar scheme that allows Single Parents to buy with 2% deposit) will run for at least the next four financial years.
- First Home Super Saver (FHSS): The FHSS scheme has been around for several years now, allowing eligible home buyers to set aside up to $15,000 of voluntary super contributions from any financial year to be put towards a home, up to a maximum of $30,000. If you’re a couple, that combined total can reach a very healthy $60,000. In even better news, from July 2022, the maximum for individuals will be raised to $50,000 (or $100,000 for couples).
Find out more about the grants and schemes for First Home Buyers in this article.
Looking to buy?
Whether you’re a first-time buyer, looking to upsize or want to build up your investment portfolio, Toowoomba is one of the best places to be. Contact an experienced local agent today to find the right place for you.