Property: The Great Aussie Generational Divide

While waiting to get my daily dose of caffeine, a woman in line and I started chatting. She was in her mid-30s.

The conversation soon enough turned to where each of us lives.  You see, in Melbourne, asking someone what neighbourhood they chose to live in is a common question. It is a quick way to gage their personality.

My husband and I live in Cheltenham.

But what she said next surprised me.

We live with my husband’s parents. In their house.

I couldn’t help myself. ‘You are living with the in-laws? How is that working out for you?

Her answer was simple. ‘We want to save for a deposit. We have to make it work.

More and more, young Australians are resorting to unconventional solutions to get on the property ladder. From living with their parents or in-laws, to getting a loan from the family or even buying with family. It is clear that young Australians are finding it tough to buy a home.

And the latest Household, Income and Labour Dynamics in Australia (HILDA) report reveals this. The report, published by the Melbourne Institute of Applied Economic and Social Research, is a longitudinal study of Australian Households.

The study collects data from the same households every year. It follows how their lives change over time.

Household, Income and Labour Dynamics in Australia

The interesting part of this study is that it follows not only the initial group of people, but their children and grandchildren. So it is a great way to see how things are changing between generations.

One of the most striking data from the study is shown in the median household wealth per age.

Age Percentage Change 2002–2014
25–34 3.2
35–44 7.4
45–54 10.8
55–64 39.1
65+ 61.2

Source: HILDA 

As you can see, household wealth has increased dramatically for groups 55+. But it has barely changed, in comparison, for the 25–54 age groups. The study shows a clear wealth divide between generations.

It’s true that new generations have more options on where to spend their money than older ones did in the past — flash smartphones, cars, world trips. But it is also true that property price to income ratio has increased in the last few years.

Aussie Salaries Can’t Keep Up With House Prices

According to the study, average home values have risen 65% between 2001–2014 — from $374.000 to $618.276. Yet income has only increased 24.1% for men and 18.4% for women employed full time during the same period.

As home prices rise faster than salaries, it is no surprise that home ownership has declined since 2001. The groups most affected are the 25–54.

Age Percentage Change in Home Ownership 2002–2014
25–34 -9.5
35–44 -10.8
45–54 -8.2
55–64 -2.2
65+ 0

Source: HILDA 

Predictably, the sharpest decline in home ownership happened in Victoria, followed by NSW — the states where property prices have risen the most. And most of the decline happened between 2010 and 2014.

Home ownership and wealth may have decreased for younger generations, yet debt has increased. And for 25–34 year olds owning a home, debt has risen more than home value.  More than for any other group. That is, they are taking on more debt to buy a home.

And this may be the cause of the wealth gap between generations.

So do you still think your kids have it easier than you? It doesn’t look like it.


Selva Freigedo,
For Markets and Money

PS: Selva recently joined the Port Phillip Publishing team as our macroeconomic analyst. She works closely with Markets and Money editor Vern Gowdie on his advisory service,The Gowdie Letter.

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money