PHOTO: First-home buyers and now upsizers are resorting to the Bank of Mum and Dad to buy property. Photo: Stephen McKenzie
Runaway house price growth has seen an increasingly prolific reliance on the “Bank of Mum and Dad” this year but now there are reports from mortgage brokers that adult children are returning a second time for help when they need to upgrade properties.
This new trend has raised concerns about a deepening of housing inequality in Australia, with the chance of home-ownership based on a person’s inherited wealth rather than individual effort.
The latest data shows Australian home values skyrocketed 18.4 per cent in the 12 months to August, the fastest rate of growth since 1989 and almost 11 times higher than wage increases, which only rose 1.7 per cent over the same time.
Snowballing property values have priced many first-home buyers out of the market. Many of those lucky enough to be able to have turned to the Bank of Mum and Dad to get on the property ladder, with their parents either acting as guarantors on a loan or giving them large sums of cash.
It is a phenomenon that has been growing over the years as the property cycle has ballooned – the Bank of Mum and Dad is now bankrolling about $35 billion worth of loans and is now the ninth biggest lender in the country.
In Sydney, where house prices rose to a new median of $1,410,133 after climbing almost $1200 a day in the second quarter of 2021, mortgage brokers say it has become part and parcel of first-home buyers getting into the real estate market.
But there are signs emerging that it has evolved further, with parents now helping their adult children upgrade from a unit to a house as they turn their first properties into investments, said James Algar, Mortgage Choice Dee Why principal.
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