The surge in property prices, especially in Sydney and Melbourne has made home owners extremely wealthy but cruelled the prospect of home ownership for many who aren’t already in the market.
That’s especially true for younger Australians.
That is causing some intergenerational issues in housing, which is a bigger question than “is there a housing bubble or not” according to RBA governor Glenn Stevens in the full transcript of his interview with the Australian and Wall Street Journal.
Stevens acknowledged “it’s always been hard to be that cohort that’s trying to enter the market. There’s always been a hurdle. It may be getting worse, though part of this is – I mean, there’s a lot of things happening here”.
One of things that’s happening, Stevens believes, is that a chunk of the wealth home owners think they are sitting on in their house will prove ephemeral. That’s because if they want their children to own a home then they are going to have to give them some of that cash to do so.
Here’s Stevens (our emphasis):
I think that a lot of people of my generation are actually going to find themselves, if they haven’t already, helping their children into the housing market because that may be almost the only way that their children can enter the Sydney market, anyway, and be not too far from mum and dad. And I suspect that will happen a lot, and that, of course, means that for people of my age, that the wealth we think we have in our house, actually, we don’t have quite as much as we thought because we’re going to have to give some of it to the next generation.
He acknowledged that for renters locked out of the property market this could mean the issue perpetuates into the next generation.
But his point about the shared wealth of families is also an important one for the future. It suggests for many children of those with property, who feel locked out of the market, the problem of home ownership can be self-curing.
That’s because, as Stevens notes, older Australians can share their wealth now.
But equally at some point, there will be an inter-generational wealth transfer when the older, home owning, family members leave their property to their kids, or quite possibly their grandchildren, as an inheritence.
With the nuclear family shrinking, and the number of children and grandchildren on average reduced from a generation or two ago, there is likely to be a large number of younger Australians coming into some serious wealth when their parents or grandparents pass on.
It could take a decade or two, but ultimately younger Australians could end up the longest living and richest generation in the nation’s history.