Gen X Surpasses Baby Boomers in Australian Property Wealth Amidst Affordability Crisis

Gen X households have reportedly surpassed Baby Boomers in property-derived wealth in Australia, according to a recent analysis, marking a significant generational shift. While Baby Boomers continue to hold the highest overall wealth, this change in property holdings occurs amidst ongoing challenges in home ownership affordability for younger generations. Historically, home ownership has been a central aspiration in Australia, with government policies actively promoting it during the mid-20th century.

Generational Property Wealth Distribution Shifts

Analysis of ABS and census data by KPMG reveals a new landscape in property wealth.
Generation X households, typically aged over 50, now possess an average of $1.455 million in wealth derived from dwellings and land. In comparison, Baby Boomer households average $1.36 million in property wealth.

Baby Boomers, however, maintain the highest overall wealth due to their substantial superannuation holdings and lower debt levels.

Terry Rawnsley, an urban economist at KPMG, identified this as a clear generational transfer of property wealth. Further data highlights the positions of younger cohorts:

Millennial households, aged 29 to 44, hold an average household property wealth of $890,000.
Households aged between 25 and 34 show an average of $575,000 in property wealth, significantly offset by an average debt of $346,000.
While home ownership rates for older generations are approximately 80%, only about half of younger households in the 25-34 age group own homes.

Home Ownership Trends and Persistent Affordability Challenges

Reports suggest that while younger Australians are entering the housing market later in life compared to previous generations, some cohorts appear to be achieving home ownership rates similar to their immediate predecessors by earlier ages. For instance, individuals born between 1977 and 1981 reached nearly identical home ownership levels to those born in the preceding five years by their 40s. Similarly, those born between 1982 and 1986 achieved comparable rates to the 1977-1981 cohort by their mid-to-late 30s. These "catch-up" trends, observed among cohorts born from 1977 onwards, do not indicate that these younger generations have reached the national home ownership rates of the oldest Baby Boomers.

Despite these specific "catch-up" trends, significant challenges in housing affordability persist across Australia:

The average new loan for an owner-occupier dwelling has increased to over $700,000, up from $512,000 just five years prior.
The ratio of typical home prices to median income has expanded from approximately four times in the early 2000s to eight times nationally and ten times in major cities like Sydney.
Saving a 20% deposit for a median-valued dwelling now takes the median income household nearly 11 years.
KPMG's Terry Rawnsley noted that only a small fraction of homes are affordable for the average first home buyer.

Factors Facilitating Market Entry for Some

AMP chief economist Shane Oliver has identified several factors contributing to some younger Australians gaining entry to the housing market:

Government Schemes: Initiatives such as first homebuyer grants and lower minimum deposit requirements (e.g., 5% deposit schemes) have offered some assistance, though they may also influence demand and prices.
Competitive Banking: Increased competition in the banking sector has introduced options like longer loan terms and interest-only loans. While these can ease initial entry, they may also lead to extended periods of debt.
Intergenerational Wealth Transfer: Financial assistance from parents, often referred to as the "bank of mum and dad," and inheritances, particularly from older generations benefiting from rising house prices, represent a significant factor in enabling home purchases for some younger individuals.

Rawnsley suggested that while first home buyer schemes may contribute to a slight price increase (1-2%), the benefit of enabling individuals to enter the market years earlier and save on rent could outweigh this for those without familial financial support.

Historical Context of Australian Home Ownership

Home ownership has historically been a central aspect of Australian identity, often linked to the "Great Australian Dream." Monash University urban historian Emeritus Professor Graeme Davison states this aspiration dates to the mid-1800s, with early Australian democracy supporting working-class home ownership. By the late 19th century, Melbourne and Sydney had some of the world's highest home ownership rates, around 40% and 30% respectively, with properties often being modest timber houses in outer suburbs.

An example from 1972 involved Neil Robertson, who purchased a two-bedroom terrace house in Fitzroy, Melbourne, at age 24 for $7,500. He financed a $1,500 deposit by selling a car and paid off the remainder over five years. After extensive renovations, he sold this property for $64,000 and acquired a second property for $50,000. This second home was sold in 2012 for over $1.5 million, after which he purchased his current residence for $1,210,000. Robertson has been mortgage-free since his early 30s.

Post-World War II, under Prime Minister Robert Menzies, government policies actively promoted home ownership. Initiatives such as the Small Homes Service provided plans for affordable housing. Home ownership peaked at approximately 70% between the 1950s and 1970s. Prior to World War II, approximately 50% of Australians were renters. Peter Mares, a writer fellow at the Centre for Policy Development, noted that the decades-long emphasis on ownership created a system where renting became a less favorable alternative in Australia.

Societal Implications

High housing costs contribute to financial stress, which can affect health, wellbeing, and economic productivity. An Australian Council of Social Service (ACOSS) report from the previous year indicated a worsening of wealth inequality among younger households, with the top 10% experiencing a 126% increase in wealth, while the bottom 60% saw a 39% rise in the two decades leading up to 2022.

Terry Rawnsley highlighted the risk of intergenerational inequity, particularly for the half of younger households unable to enter the property market, noting that missing out on property purchase in one's 20s or 30s could impact wealth accumulation for decades.

Ensuring housing affordability for all generations is considered crucial for social cohesion and stability.