Australian millennials have the second-lowest level of home ownership for their peer group, an HSBC Holdings Plc survey found, just ahead of an oil-rich absolute monarchy.
Only 28 percent of Australians aged between 19 and 36 own a home, pipping the United Arab Emirates on 26 percent, the survey of more than 9,000 people in nine countries showed. That was well below France on 41 percent and far beneath China on 70 percent. Three-quarters of Aussie millennials said the challenge of saving a deposit was their biggest barrier.
“Despite the rising costs, millennials overwhelmingly still want to own a home in Australia,” Alice Del Vecchio, head of mortgages at HSBC Australia, said in a statement Thursday. “The dream certainly isn’t dead.”
Australia’s east coast property market has rocketed in the past five years as the central bank slashed interest rates to support the economy’s transition from mining to services and manufacturing. On top of cheap cash fueling demand, domestic investors seeking a decent return and taking advantage of tax breaks have been snapping up properties, while foreign buyers, particularly Chinese, looking to park their cash offshore have supercharged the market.
The record-low cash rate of 1.5 percent has provided little help to savers; in addition, the speed with which prices have risen has made it particularly difficult to nail down a deposit. Since 2009, house prices in Sydney have more than doubled and Melbourne has similarly surged. Still, 83 percent of Aussie millennials intend to buy a home in the next five years, the report found.
Young Australians said their second-biggest barrier to ownership was an insufficient salary to allow saving, with 61 percent needing a higher wage before they could buy a home, compared with 54 percent of their U.K. peers, according to HSBC. A key problem in post-mining boom Australia has been anemic wage growth as the economy adjusts to regain global competitiveness.
Reserve Bank of Australia Governor Philip Lowe noted Tuesday that in the past 12 months household debt – mainly mortgages – has increased 6.5 percent compared to a 3 percent gain in household income.
According to HSBC, 45 percent of Australian millennials who do own a home said they had overspent on their original budget, while only 17 percent of millennials have a precise budget for buying a home in the first place. HSBC said this demonstrated that many are not yet prepared for the realities of owning real estate in Australia.
As to the “bank of mum and dad” as a source of funding, HSBC said this was most common in the UAE with 50 percent tapping their parents and least common in France at 26 percent.
A Deloitte report earlier this year found Australian millennials are particularly pessimistic about their prospects: Just 8 percent expected to be better off financially than their mum and dad, compared with a global figure of 26 percent; even worse, only 4 percent of Aussies reckoned they’d be happier than their parents, versus 23 percent internationally.
Counterintuitively, given Australia had its last recession in 1991, none of this generation of Australians have lived through a slump; indeed, the youngest adults in the workforce when it happened would be approaching their mid-forties this year.
Bloomberg
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