Waiting to borrow: buying a first home amid soaring real estate prices feels grimly Beckettian
“The place had no kitchen. Just an oven. Good bones, but it was going to need a gut reno at some point. The price guide said $1.1m. We thought we were in with a chance.”
I was listening to a friend describe their most recent experience at an auction in Sydney. But really, it could have been any number of conversations I’ve had lately. They all end the same.
“We turned up to the auction and they started the bidding at $900,000. A lot of people our age had brought their parents. Bad sign. Then someone yelled out ‘one point four!’ $1.4m! And it just took off. I literally laughed because I couldn’t believe it. It ended up going for $1.6m. Half a million over the price guide.”
If you’re a would-be first homebuyer in Sydney, or any of the Australian property markets going up like a tyre fire at the moment, you’re probably familiar with this conversation too.
Property prices surged in March at their fastest rate in 30 years, according to data released last week from Core Logic. The median house price in Sydney rose about $50,000 in a month, and $20,000 in Melbourne. It comes after nearly a decade of staggering growth: since 2012, house prices have risen 50% in Melbourne, and 70% in Sydney.
Unlike previous surges, it’s not rapacious investors who are driving the boom. It’s people like my friends and me: first homebuyers, as well as owneroccupiers.
According to the federal government, it’s a sunny state of affairs.
“It’s good news that first homebuyers are coming into the market in such a strong fashion,” Josh Frydenberg told the ABC last Wednesday, after he was asked how worried he was about surging prices and young buyers getting in over their heads.
But I’d wager none of us actually wanting to buy our first home feel like we’re part of a good news story right now.
Instead what I see around me are people gripped by rising FOMO, fuelled by failed predictions that high prices were a bubble that would burst any day now, or that the pandemic would bring some relief. With interest rates historically low, and the value of deposits shrinking in relative terms, lots of people figure they can’t, and shouldn’t, wait any longer.
Among my 30-something friendship group, anxiety about house prices is turning otherwise pleasant social events into circular, Beckettian discussions about real estate. People looking to buy seem to find each other, like members of an obscure and terrible fandom. We’re the ones huddled, sharing auction horror stories and lamenting why we didn’t get in sooner, or wondering aloud whether we should all just move to Bulli and lump the long commute (though the median house price there has grown by almost 60% in five years, so … maybe not?)
There’s some generational solidarity in this general air of despair about rising prices.
But underneath that sits an uncomfortable reality that can be harder to talk about even among friends – that some people can rely on help from their parents and some can’t. It is a factor which increasingly determines what you can buy, or whether you can own a home at all.
The Australian Financial Review reported last month the “bank of mum and dad” had effectively become Australia’s ninth biggest mortgage lender, with parental contributions to loans averaging “more than $89,000, an increase of nearly 20% in the past 12 months”. Baby boomers were also increasingly gifting the use of equity in their own homes to help their kids secure loans. Others can offer their adult children a year or two at home, rent-free, to save a deposit.
All of this game-changing help is of course only available to some. Plenty of people don’t have a “bank of mum and dad” – they just have parents, or a parent, who maybe aren’t well off, or don’t own a house, or who they can’t rely on in any way. Others my age are already supporting or caring for their parents, and some don’t have parents at all.
Among my own circle, many of whom have worked in similar industries, on similar salaries for years, a schism in home ownership is opening up between those who have their parents’ help and those who don’t (as well as between those on dual incomes and single people).
This type of schism is a key factor in widening wealth inequality in Australia, as homeowners have seen their household wealth rise along with property prices. Renters, whose security and rights in Australia pale in comparison to many places overseas with comparably expensive housing markets, miss out on this benefit entirely. This inequality will only get worse as some among my generation eventually inherit their parents’ wealth and assets, and others do not.
And despite the recent push by first homebuyers into the market, it seems unlikely that the overarching trend of falling home ownership will be impacted in a meaningful way. As Clancy