Pam WalkleyREAL ESTAT
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Parents have to be creative as high housing costs force kids to live at home longer
M
any young adults,
finding it increas-
ingly difficult to
embrace the great
Australian dream of home own-
ership, are staying put in the
family home. Almost two-thirds
of those living at home (62%)
can’t afford to move out, while
21% of those aged 18 or over and
living in the family home expect
to remain with their parents
until they are at least 30, accord-
ing to CoreLogic’s Perception of
Housing Affordability survey.
The vast majority of
non-homeowners (89%) believe
it’s important to own a property but 87%
are concerned they can’t afford to do so,
according to the survey.
With many young first-home buyers
priced out of major city markets, especially
Sydney and Melbourne, helping their kids
is high on the agenda of many parents.
Many have given up expecting much help
from governments, with the federal govern-
ment doing little to tackle the problem in
the 2017 budget despite a lot of talk before-
hand. And the jury is still out on the effects
of Victorian and NSW measures to cut
stamp duty on properties priced less than
$600,000 and $650,000 respectively.
Some parents are able to help their kids
financially but not all can. And even then
kids need somewhere to stay while they’re
saving at least part of the deposit. If they
have to pay the high rentals required in
many cities, it will severely curtail their
ability to stash money away. Saving for a
deposit is perceived to be the biggest
impediment to buying a property, accord-
ing to CoreLogic’s survey.
The phenomenon of kids staying at home
for extended periods could see the rise of
“cubby house syndrome”, where parents
try to fashion some sort of independent liv-
ing arrangements for their adult children
on their existing premises, says Lisa Claes,Rentals out of reach
Pensioners and working parents have
been priced out of the rental market in all
metropolitan areas, according to the latest
Rental Affordability Index (RAI). Rental
affordability dropped in all cities except
Perth over the last quarter.
Rental affordability in Sydney is at a
record low, with a full-time teacher who is
a single parent paying 43% to 55% of the
family’s income on rent, says Ellen Witte,
partner at SGS Economics & Planning.
The situation for pensioners is even
worse – a single pensioner renting a
one-bedroom unit anywhere in Sydney
needs to put 60% or more of their
pension towards rent.
National Shelter, Community Sector
Banking and SGS Economics & Planning
have released the RAI on a biannual
basis since 2015.granny flats – but for the kids
instead of grannies. Home exten-
sions can also be a possibility
and innovative architects will
be looking at the construction of
multi-generational homes.
Parents who don’t want the
kids at home forever can consider
downsizing to release funds to
help them into their first home.
Some were given an incentive
in the 2017 budget: a couple aged
65-plus who sell the home they
have lived in for at least 10 years
will be able to make a non-conces-
sional contribution of up to
$300,000 into their super
from the proceeds of the sale.
Some of the funds released could also
go to helping the kids. One of the most
popular ways is to gift your children
money towards a deposit or cover the
entire deposit. A disadvantage is that
it’s not easy to get the money back if you
need it later. And if your child splits with
their partner, some of your gift will end
up in the ex’s pocket.
If you structure this as a loan it gives you
more protection. You can do this through
an unregistered loan secured by the prop-
erty and specify the amount lent, the
interest rate and the repayment date, which
can be rolled over.
You can also specify, if there is a break-
up, that the property is sold, your loan is
repaid and each partner gets back their
share of the deposit before the remainder
of the proceeds are split between them.
This protects you and your child, especial-
ly if they paid more of the deposit.
And, if you wish, your wills can include
a clause forgiving the loan on death.Pam Walkley, founding editor of Money and
former property editor with The Australian
Financial Review, has hands-on experience
of buying, building, renovating, subdividing
and selling property.CEO of CoreLogic. “Cubby house syndrome
could be the reluctant compromise for
young people unable to follow the tradition-
al rite of passage of buying their own home.”
Spare spaces such as garages, rumpus
rooms and studios will become the new