Real es­tate: Pam Walk­ley

Par­ents have to be cre­ative as high hous­ing costs force kids to live at home longer

Money Magazine Australia - - CONTENTS - 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.

Many young adults, find­ing it in­creas­ingly dif­fi­cult to em­brace the great Aus­tralian dream of home own­er­ship, 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, ac­cord­ing 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 govern­ment do­ing lit­tle to tackle the prob­lem in the 2017 bud­get de­spite a lot of talk be­fore­hand. 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, ac­cord­ing 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 liv­ing ar­range­ments for their adult chil­dren on their ex­ist­ing premises, says Lisa Claes, CEO of CoreLogic. “Cubby house syn­drome could be the re­luc­tant com­pro­mise for young peo­ple un­able to fol­low the tra­di­tional rite of pas­sage of buy­ing their own home.”

Spare spa­ces such as garages, rum­pus rooms and stu­dios will be­come the new granny flats – but for the kids in­stead of grannies. Home ex­ten­sions 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-con­ces­sional 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 prop­erty 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 breakup, 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, es­pe­cially if they paid more of the de­posit.

And, if you wish, your wills can in­clude a clause for­giv­ing the loan on death.

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