Pounce or pause? Millennials’ property dilemma

Since peaking in October 2017, national house prices have fallen by 7.9 per cent, marking one of the sharpest downturns in decades and giving homeowners little reason to celebrate.

Yet this dip in the market has presented a fresh opportunity for millennials, who in previous years found themselves priced out of a highly competitive market.

While millennials were often thought to be frivolous with their money, subjecting themselves to a lifetime of renting due to a penchant for brunch and an inability to save, new research by Finder shows that over one-third (35 per cent) are now looking to take advantage of falling property prices and buy property this year.

This is in keeping with findings published in the Westpac-Melbourne Institute Index of Consumer Sentiment, which showed that the “time to buy a dwelling” index has risen 28 per cent from its mid-2017 low, although it came off a bit during May, dropping 3.8 per cent from a four year high in April.
 

And millennials are making the financial sacrifices required to get a foothold in the market.

Research published in the Australian Millennial Report 2019 shows an increase in the number of millennials living with their parents in order to save for a house deposit. This figure has jumped from 2 per cent to 7 per cent in just 12 months.

Yet this widespread return to the nest is not for a lack of independence.

Finder research shows that 58 per cent of property-seeking millennials are choosing not to use a guarantor – buying a house is something they want to achieve on their own terms. The average mortgage size for millennials is now around $438,000, which prospective owners are hoping to secure with an average deposit of 18 per cent. This means they still need to scrape together $78,840 in savings.

However, the Coalition’s latest promise to help 10,000 first homebuyers enter the market may see that amount significantly reduced. The Coalition has pledged to lower the required deposit amount to 5 per cent with a government guarantee for the remaining 15 percent – an initiative to avoid lenders mortgage insurance and one that Labor has already committed to match. Whether this leads to an overload of debt through increased interest remains to be seen. But as UBS economists pointed out, borrowers will still need to meet responsible lending laws and bank credit assessments, potentially resulting in a relatively minor overall impact.