Home ownership

In recent years, the rising property prices in Australia have made it increasingly difficult for young people to enter the property market. As a result, many parents are choosing to help their adult children purchase their first home by contributing to the deposit or offering to co-sign the mortgage. While there are potential benefits to parents helping finance their child’s first home, there are also legal and financial risks that need to be carefully considered.

As highlighted by a recent survey conducted by progressive think tank Per Capita, rising house prices are now considered a major threat to the economy. The Per Capita survey also sheds light on the challenges faced by young Australians looking to enter the property market.

Here are the stats:

Two-thirds of prospective Australian home buyers believe they will only be able to afford a property if they receive an inheritance from their parents.
The Australian Housing Monitor survey shows that 85% of non-home owners hope to buy their own property, but just 24% think they will ever have the financial resources to do so.
Issues around housing have intensified with rental vacancy rates in most capital cities at or below 1%, and house prices doubling over the past decade.
The monitor found the combination of soaring prices and the tightening rental market has left many Australians fearful they will never own a home.
Even among those earning over $104,000, more than half (53%) say they will need an inheritance to buy a home.
Almost three-quarters of people believe governments should build more social housing.
The director of the Centre for Equitable Housing at Per Capita, Matt Lloyd, said Australians were worried by the problems caused by ever-increasing house prices but open to policy reform.
The housing fund is meant to provide $500 million a year in returns to get 30,000 social and affordable homes built over the next five years. Additionally, it will provide $200 million to repair housing in remote Indigenous communities, $100 million for crisis accommodation for women and children escaping domestic violence, and $30 million for housing for veterans.

The decision of whether or not parents should help finance their child’s first home is a complex one that requires careful consideration. On the one hand, parental assistance can provide young people with a leg-up onto the property ladder and help them secure their financial future. On the other hand, there are significant legal and financial risks that need to be carefully considered.

Time to seek legal advice:

It is important for parents and their adult children to seek independent legal and financial advice before making any decisions about parental financial assistance. By doing so, they can ensure that their actions are in the best interests of all parties involved, both now and in the future. More specifically, seeking legal advice can ensure that: