Young Australians show ‘blind optimism’ they’ll own a home: AHURI report

Many young Australians show “blind optimism” when it comes to home ownership despite worsening affordability and stagnant wages, a new report shows.

And more young people are being priced out of the opportunity to rent a home by themselves, turning instead to shared housing or living with their parents into their 30s.

It comes as property markets around the country are starting to pick up in the wake of the federal election and two interest rate cuts, with prices not having fallen far enough for many first-home hopefuls to break into the market. Meanwhile, wages growth is falling short of Reserve Bank targets, official figures show.

Of the 18 to 24-year-olds surveyed, 32 per cent thought they would be able to own a home in five years, the Australian Housing and Urban Research Institute studyYoung Australians and the housing aspirations gap found.

Some 36 per cent thought they would own property in five to 10 years.

One of the report’s authors, Swinburne senior research fellow Sharon Parkinson, said this was despite very few young Australians actively preparing to buy a home.

“The younger age groups are prioritising their other aspirations, getting their lives together and then housing is a secondary concern,” Dr Parkinson told Domain. “There’s a lot more uncertainty about where they’re headed without any sense of how it all comes together.

“They’re keeping their options open and not planning for their housing future.”

Dr Parkinson suggested that as younger Australians moved into the next age bracket of 25 to 34 years, they lost some optimism, as completing higher education and moving into the job market brought them back to their financial reality.

“They have blind optimism for their housing future,” she said. “In early adulthood we found more evidence of active planning, but then we found more evidence of the aspiration gap closing. There’s more of a divide in what people think is realistic.”

Even renting is increasingly out of reach. Only 17 per cent of 18 to 24-year-olds lived independently and two-thirds were still living with their parents.

A third of the 25 to 34-year-old age group were not renting independently, either living with their parents or in a share house.

“That never used to be the case. Whether your parents where working or middle class, you could still purchase a property and you had aspirations to do so. That appears to be really shifting,” Dr Parkinson said.

Renters were often required to move house and their short-term aspirations focused on finding only a slightly better place to live, with no sense of moving upwards or getting closer to home ownership, the report found.

Grattan Institute Household Finances Program director Brendan Coates said a 10-year time frame was becoming more unlikely as time wore on.

“The deposit hurdle has become higher over time,” he said. “Back in the 1990s it used to take just six years for the average income earner to save a deposit for the average house and now we’re talking about nine to 10 years, and then longer in Melbourne and Sydney.”

The time taken to save a deposit would grow longer as housing prices increased out of step with incomes, Mr Coates said.

Despite the cooling property market of recent years, Sydney’s median house price remains at $1.03 million with Melbourne’s $818,237, the latest Domain House Price Report shows.