HILDA reports growing wealth gap between young and old

According to the annual Household, Income and Labour Dynamics in Australia (HILDA) survey, the wealth gap between young and old is rapidly widening and today’s younger generation are having to find new ingenious ways to get a foothold on the property ladder.

The HILDA survey, which is collected by the Melbourne Institute of Applied Economic and Social Research has been running since 2001 and is a nationally representative longitudinal survey of Australian households. It collects important data on a range of aspects of life in Australia including household and family relationships, child care, employment; education, income, expenditure; health and wellbeing, attitudes and values on a variety of subjects, and various life events and experiences.

The latest 2016 HILDA Survey has found that the wealthiest Australian households were couples 65 years and over, who enjoyed a massive increase in their median net wealth of 61.2 per cent since 2002. For those aged between 25 to 34, this was just 3.2 per cent.

It comes as no surprise that there are large differences in median wealth by age group. Wealth generally accumulates over the lifecycle so those 65 years and older have had more time to make their money work harder for them compared to the younger generation. However, the older generation has particularly done well these last few years with booming property prices in Sydney and Melbourne which have had a positive impact on their wealth.

Today, the increasing cost of property prices is one of the main contributors of younger people unable to get a foothold on the property ladder, but we can’t completely blame high property prices for this. We are now living in a world where we want more from life. We want to eat out at fancy restaurants, drive expensive cars and jet away on luxury holidays. We are now more tech savvy than we have ever been and the younger generation in particular want the newest of everything, whether it is the latest iPhone, TV or computer. However, all of this costs money, so for those who really want to own a property, something needs to give.

Those looking to buy property are now staying at home longer and living with their parents to save up a deposit, asking parents for a loan or just having to live more frugally.

The number of homeowners in Australia is actually now falling. In 2001, 68.8 per cent of households were owner occupied, compared to 64.9 per cent of households in 2014, a fall of 3.9 per cent.

Although the younger generation may be spending more on luxuries, the older generation has benefited greatly from the huge increases in property values, whilst the property price to income ratio has also increased over the last couple of years.

Between 2001 – 2014, the average home value has risen 65 per cent from $374,000 to $618,276. However, income has only risen by 24.1 per cent for men and just 18.4 per cent for women employed full time during the same period.

House prices are clearly rising faster than salaries, making home ownership increasingly harder especially for those between 25 and 54. Both Victoria and New South Wales have recorded the sharpest fall in home ownership, where property prices have risen the most.

According to report author, Professor Roger Wilkins, “I think what we are seeing in the housing market is declining homeownership amongst younger people and an increasing likelihood that many of these people will never own their homes, and I think in the Australian context that has socially undesirable consequences.”

So what can the younger generation do to be able to afford their own home?

As well as home buyers asking their parents for help, or staying at home longer, many first home buyers are now looking at becoming a property investor first and a first home buyer afterwards.

Buying a property in your home capital city such as Sydney could prove difficult with the highest property prices found here. Instead, you might be better off investing in property interstate such as in Brisbane where property prices are still very much affordable and the capital city has yet to boom like Sydney and Melbourne recently did.

There are still many opportunities within Brisbane to take advantage of right now and there are even some developers offering incentives such as 5% deposits which could help you.

What many buyers often don’t realise is that you can invest in a number of properties first and when you do decide to buy a home to live in, you can then buy your home as a first home buyer and use the first home owner grant towards this (if you are eligible). You don’t need to buy your first home to live in first. This approach allows you to get a property under your belt, save on some tax and watch your property grow in value. You can then use some of the equity from this property to purchase another investment property or your owner occupied home.

To find out more information about getting on the property ladder, the HILDA Survey and what property opportunities we currently have available to suit your budget and requirements, get in touch with our Property Consultants today by calling 1300 123 463.

Our Property Consultants have a wealth of knowledge and years working in the industry so can help guide you in the right direction and hopefully help you secure a property sooner than you think.
Published on 16th of August 2016 by Marty Stanowich
Marty Stanowich
Marty Stanowich

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