Gen Z faces several significant challenges in achieving homeownership:
Affordability Crisis
- High property prices: Housing affordability is at its worst level in 30 years, with record-high house prices making it increasingly difficult for Gen Z to enter the market
- Deposit hurdle: The size of the initial deposit needed to secure a home loan is a major obstacle, even for those with good incomes
- Reduced borrowing capacity: Rising interest rates have decreased the average amount homebuyers can borrow by 30% since 2022
Economic Factors
- Wage stagnation: Property prices have outpaced wage growth, exacerbating affordability issues
- Student loan debt: Significant student loan burdens impact Gen Z’s creditworthiness and ability to save for down payments
- High cost of living: Inflation and rising rents make it challenging to save for a home while meeting daily expenses
Market Conditions
- Housing shortage: A rapidly growing population is outpacing new housing supply, with dwelling approvals and construction starts at decade lows
- Lack of affordable starter homes: There’s an ongoing shortage of entry-level properties suitable for first-time buyers
- Competition: Gen Z is competing against cashed-up Baby Boomers and established Millennials who have had longer to save
Systemic Issues
- Generational disadvantage: It’s more difficult for Gen Z to buy a home compared to previous generations at the same age
- Declining homeownership rates: Gen Z is half as likely to own a home compared to Baby Boomers at the same age
- Gender disparity: Gen Z males have a significantly higher homeownership rate (51.6%) than females (27.3%), despite women placing greater importance on homeownership
These challenges are creating a situation where many Gen Z individuals feel that homeownership is out of reach, with only 41% of young people aged 18 to 24 believing it’s likely they’ll be able to purchase a home
Are there any government programs or policies aimed at helping Gen Z achieve homeownership
Home Guarantee Scheme (HGS)
This scheme supports eligible home buyers, including Gen Z, to purchase a property with a low deposit:
- First Home Guarantee (FHBG): Allows first-home buyers to purchase a home with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI)
- Regional First Home Buyer Guarantee (RFHBG): Supports first-home buyers in regional areas to buy a home with a 5% deposit
- Family Home Guarantee (FHG): Enables single parents or legal guardians to buy a home with just a 2% deposit
The scheme has been expanded to allow joint applications between siblings, friends, and family members, making it more accessible for Gen Z
Help to Buy Scheme
This shared equity program, currently before parliament, aims to help low to middle-income earners into homeownership:
- The government would contribute up to 40% of the purchase price for a new home and up to 30% for an existing home
- If passed, it could help 40,000 eligible households per year
First Home Owner Grant (FHOG)
Various states and territories offer different versions of first home owner grants, which can provide financial assistance to Gen Z buyers
HomeBuilder Grant
While this program has ended, it provided grants for eligible owner-occupiers (including first home buyers) to build a new home or substantially renovate an existing one
Housing Support Program (HSP)
This $1.5 billion program aims to support the delivery of increased housing supply by funding infrastructure projects and improving building planning capability
National Housing Accord
The government has set an ambitious target to build 1.2 million new, well-located homes over 5 years from July 1, 2024
This initiative aims to increase housing supply and potentially improve affordability for Gen Z buyers.
Expanded Eligibility Criteria
The government has expanded eligibility for various schemes, allowing more Gen Z individuals to access support:
- Friends, siblings, and other family members can now apply together for certain programs
- Non-first home buyers who haven’t owned property in Australia for 10 years can now access some schemes
These programs and policies demonstrate the government’s efforts to address the challenges Gen Z faces in achieving homeownership. However, it’s important to note that housing affordability remains a significant issue, and these measures are part of ongoing efforts to improve access to homeownership for younger generations
Next Steps
To understand your home ownership options, chat with an experienced mortgage broker
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