How funds from parents boost home ownership rates

7 December 2015

Gifts and bequests aid home attainment but widen wealth inequality, notes a new report.

A hand dropping keys into another person's hand.

Metropolitan house prices have created concern about the ability of younger Australians to enter into homeownership.

A gift of $5000 or more from a parent can significantly lift the home ownership rates of Australians aged 25 to 65, research shows.

Bequests play a significant role in boosting home ownership, according to the study. Outright home ownership is 10 percentage points higher among Australians aged 25 to 65 who have received a bequest as opposed to those who have not. 

The research was carried out for the Australian Housing and Urban Research Institute (AHURI) and co-authored by Professor Garry Barrett and Associate Professor Stephen Whelan at the University of Sydney, with RMIT University. 

The study looked at bequests — financial gifts given in a will — and ‘inter vivos’ transfers, those made during a parent’s lifetime.

Rental gap

The researchers’ modelling shows bequests and transfers from parents over the period 2001 to 2010 increased the level of wealth inequality, coinciding with a widening gulf between owners and renters. 

Metropolitan house prices have created concern about the ability of younger Australians to enter into homeownership. Existing evidence indicates that homeownership rates among people aged between 25 and 34 has fallen by as much as one-fifth over the past three decades. 

The study notes the ‘Baby Boom’ generation benefitted from relatively good post-war economic conditions, which underpinned increasing rates of homeownership and the accumulation of wealth through an asset that had preferential tax treatment. But this has seemingly been at the expense of their children’s home ownership prospects. 

In 2011, roughly three in four persons aged 55 years or over were owner-occupiers, but only one in three persons under 35 years of age were home owners in that same year. Rates of home ownership in this young age group are 22 percentage points lower than they were nearly 30 years ago.

Around one in 20 Australians receive a funds transfer from their parents specifically for the purpose of home ownership in any given year, according to the research.

The study drew on a Household Income and Labour Dynamics in Australia (HILDA) dataset from 2001 to 2013.

Read the full AHURI report.


Luke O'Neill

Media and Public Relations Adviser (Humanities and Social Sciences)