Millennials have got it tougher after all

I GUESS all the doubters have been put firmly in their place this week by the grand poobah of finance and housing, no less – the Reserve Bank of Australia.

Generation Y and the millennials are not just a bunch of avocado-eating, “want-it-now” softies, after all.

They do have it harder than their predecessors when it comes to buying property but, take a breath and count to three – parents, don’t help them out with a deposit.

According to research from the Reserve Bank, the extreme rise in property prices in the past seven years means it is much harder to save a deposit than previously.

The average deposit during the past seven years was equivalent to 75% of disposable annual income of wannabe home buyers, compared with 52% during the previous seven years.

In dollar terms, the difference is $28,000.

And although the RBA used its latest analysis to say that high levels of household debt aren’t as bad as people seem to think, the information clearly demonstrates just how rapidly house prices have inflated.

And for the record, household debt – the ratio of debt to income – has jumped from 100% to 160% during the past 14 years. Which means for every $1 we each earn, we owe $1.60.

But regardless if you think household debt levels are manageable or not, alarm bells should be ringing throughout the country about having so much debt hitched to assets that have gone through such rapid price inflation.

As history tells us, when the crunch comes, there is a high risk that resale values could fall just as rapidly.

But hey, we know all this, right?

So with our eyes wide open, let’s get back to those first-home buyers. More specifically, let’s address the parents and families of those first-home buyers.

According to the research, home buyers who are helped with a deposit by family and friends are twice as likely to come back looking for more handouts.

About 23% of home buyers who were helped with a deposit also needed more financial help in the years after their purchase. This compares with just 11% of home buyers who weren’t helped with their deposit.

So, parents, grandparents, uncles and aunties, no need for any family squabbles or guilt about saying no to helping stump up a home deposit – because the Reserve Bank says so.

If you can’t make your own deposit, you’re less likely to manage your ongoing finances.

Adding to these sometimes fraught family dynamics at the first-homebuyer life stage is also the increasingly attractive pool of superannuation that millennial parents will all now have.

Retirement is not the green light to withdraw a lump sum and give it to the kids. Yes, we know you want to help them, but handing over this money only means those same kids are going to have to support you later – or will they?