More than half of Australian first-home buyers now receive help from their parents to get a toehold in the property market. Picture / Getty Images
More than half of Australian first-home buyers now receive help from their parents to get a toehold in the property market. Picture / Getty Images
More than half of Australian first-home buyers now receive help from their parents to get a toehold in the property market.
And why not? Many Australians aged 55 to 75 have built up large amounts of personal wealth thanks to the rapid rise of house prices in the decades since they first entered the property market.
But the trend raises the possibility that we will live in an increasingly divided society, where economic inequality is passed down through the generations.
The rise in property prices that has boosted homeowners' wealth has also put home ownership out of reach for their children. What parent wouldn't want to tap into the equity in their own homes by way of a loan, a gift or a mortgage guarantee to help their children on the path to financial security?
Data collected by Digital Finance Analytics shows the extent to which parents are helping.
In March 2010, just 3.3 per cent of first-home buyers received help from their parents. By the end of 2017, that figure had skyrocketed to more than 55 per cent. About two-thirds of those received help with putting together a deposit large enough to make a property purchase, according to the Digital Financial Analytics Data.
And where parents chip in for the deposit in one way or another, the average value of their help is more than A$88,000 ($94,874).
This is a huge leg up for young people looking to buy their first house because the main issue with housing affordability is not so much meeting the repayments – the current era of low interest rates means they are generally affordable.
The big difficulty is assembling the deposit, particularly in Sydney and Melbourne where property prices are the highest.
This trend puts those with parents wealthy enough to help them into the housing market in a strong position. As the decades pass, they will pay off their house, potentially trade up to something larger and presumably receive a generous inheritance from their comfortably-off parents.
When the time comes, they will be in a position to help their own children into the property market, and the cycle will repeat itself.
Those whose parents can't help them are much worse off, and in many cases their children will be too.
There will obviously be exceptions, but many will be condemned to be perpetual renters, unable to get far enough ahead to cobble together a deposit. And when their children are in their 20s and 30s they won't be in a position to help them either, and the inequality will continue through the generations.
It is another reason why Australia's housing affordability crisis is such a pressing issue and one that threatens the fabric of our society.
More bad news for Myer
Department store Myer has been booted out of the S&P/ASX200 index in a quarterly overhaul after a 60 per cent share price fall over the past 12 months.
The fact that Myer is no longer valuable enough to command a place among Australia's 200 largest listed companies speaks both to the mismanagement of the business and to the pace of digital disruption.
Shares in the retailer have fallen 88 per cent since private equity investors sold it off and relisted it on the sharemarket in 2009. They have never closed above their A$3.84 IPO price and on Friday closed at a dismal A44c.
Department store Myer has been taken out of the S&P/ASX200 index in a quarterly overhaul. Picture / Getty Images
Among those companies elevated to the ASX200 this quarter was NZ accounting software company Xero, which recently delisted from the NZX. In fact, after last year's 90 per cent share price rise, Xero was large enough to be promoted to the AXS100. It took the place of newspaper publisher Fairfax Media, another company that has been blindsided by the rise of the internet.
Myer's latest fall from grace is another blow to the company after chief executive Richard Umbers was forced out in February following the retailer's third profit downgrade in eight months.
The century-old bricks and mortar retailer's turnaround strategy simply isn't working and it hasn't been able to staunch a loss of sales.
Its market value has fallen to less than A$360 million, while the value of online competitors has surged.
Online retailer Kogan.com, for instance, was founded by Ruslan Kogan a little more than a decade ago when he was aged just 23 and the company is now worth A$820 million.
While Myer searches for a new chief executive, who will presumably conjure up another turnaround strategy, the company is also under attack from within.
Billionaire Solomon Lew owns about 11 per cent of Myer and plans to call a shareholder meeting to oust the current board if he can win sufficient support from institutional holders.
