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Victorian parents to the rescue in ‘broken’ property market

By Emma Smith

THE “Bank of Mum and Dad” is now the nation’s fifth largest mortgage lender after the big four banks, according to new research.

The data from financial comparison website reveals 29 per cent of Australian families offer financial help to their kids, lending an average amount of $64,206.

As a whole, Aussie parents have lent their children $65.3 billion, based on a survey of 1002 Australian adults.

Almost $16.6 billion of that has come from Victorian mums and dads — the second highest contribution of the capitals, behind NSW at $32.7 billion.

The average mum and dad loan in Victoria is $62,053.

Mozo’s survey asked parents how they helped their children and, if they did, how much they contributed.

Allowing adult children to live at home rent free was the biggest financial leg-up, offered by 15 per cent of Victorian respondents, higher than the national average of 13 per cent.

This support cost Victorian parents an average of $21,560.

Victorians also lent an average of $44,503 to their children for a deposit. About 12 per cent of parents propped up their kids’ deposits.

Buyers’ advocate Frank Valentic, of Advantage Property Consulting, said about 70-75 per cent of first-home buyer clients were supported financially by the Bank of Mum and Dad.

“We have had a lot of clients getting help from parents, either by staying at home rent free, as guarantor or the parents are contributing to the deposit either as a gift or a loan,” he said.

Mr Valentic said price rises in most suburbs had far outstripped wages growth in the past year.

“I can only see the Mum and Dad Bank becoming more important,” he said.
Mozo director Kirsty Lamont said the popularity of the Bank of Mum and Dad showed Australia’s property market was not readily accessible to younger generations.

“With Australian property prices rising by 618 per cent over the past 30 years and national incomes failing to keep up, the Bank of Mum and Dad is proof of family generosity but also points to a broken property market for younger generations,” she said.

Melbourne median house prices have grown 9 per cent to $665,000 in the 12 months to May, CoreLogic records show. They have grown 24.3 per cent in the past three years.

“For many first-home buyers, house prices around Melbourne can be absolutely daunting,” Ms Lamont said.

“It can take years to scrimp and save for a home deposit, all the while house prices continue to skyrocket, becoming increasingly inaccessible.

“We’re seeing the Bank of Mum and Dad playing a huge part in helping children take their first step towards acquiring a home.”

The Mozo survey found 66 per cent of parents had chipped into their own savings to help their kids on to the property ladder, while 26 per cent had cut back on expenses and 13 per cent had pulled equity from their own home.

The majority (67 per cent) did not expect repayment for their contribution, while almost one third expected payment in part or in full without interest.

The most expensive way Victorian parents helped out was by spending an average of $283,333 on property on behalf of the children (1 per cent of respondents), followed by an average of $126,143 on property bought as a partner (also 1 per cent).

Article written by Hayley Goddard and published on 06 SEP 2017.
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