Will Generation Z ever own a home?

The challenge of homeownership is particularly steep for Gen Z. Those without parental help may be forced to delay having a family so they can save, while others may resign themselves to a lifetime of renting.

Issac Kelleher, 23, lives in a share house in outer Melbourne and is determined to own his own home before starting a family.

But the chemistry student believes budgeting and saving “can only get you so far” in today’s market. Instead, he may have to delay having children.

“I probably won’t be able to afford a mortgage until well into my 30s. So my plan is to delay the big things in life until I can really afford it,” he told realestate.com.au.

Issac says he’s not alone.

“For many people my age, the concern is not on short-term pleasantries like holidays or going out for dinner, it’s on their future.

“But for many, it’s simply too painful to have a realistic long-term approach to owning a home because they know how incredibly difficult it’s going to be.”

Newlyweds Jemma and Liam Conley in Launceston, both 24, have been saving money to buy a home since they were teenagers.

Despite a $50,000 deposit, various obstacles including job instability, ineligibility for the First Home Owners Grant (FHOG) and unaffordable mortgage repayments, have hindered their home-purchasing plans.

“With rent increases and changes to our job situations, we’ve had to use our savings just to live,” Jemma said. “We want to buy a small house so we can start a family, but it feels like we’re never going to be able to do it.”

Jemma believes the FHOG, for which the eligibility criteria and amount you can receive varies in each state and territory, simply doesn’t cut it.

“Even if we were able to get the grant, there’s very few houses that would be inhabitable within that price range,” she said.

“I feel like it’s been made a lot harder than it should be for younger people trying to begin their lives.” 

In Tasmania, the FHOG is only available for eligible applicants who purchase or build a new home.

Why is it so hard?

For many Gen Zers – those born between 1997 and 2012 – homeownership is a daunting prospect.

Given they’re currently aged between 12 and 27, some aren’t yet old enough to buy a property, and many think they never will.

The 2023 Youth Barometer reveals only 41% of young people aged 18 to 24 think it’s likely that they’ll be able to purchase a home. Those with mental health conditions, long-term illnesses and physical disability have even lower confidence.

It comes as a recent PropTrack report found housing affordability is now at its worst level in 30 years, with record high house prices meaning it’s taking longer and longer to save a 20% deposit, while rising interest rates make repayments harder and reduce borrowing capabilities.

And they’re competing against cashed up Boomers and coupled up Millennials, who’ve had longer to save.

“The barrier to entry has been going up and up,” explained PropTrack economist Anne Flaherty. “It’s more difficult for Gen Z to buy a home than it is for Millennials, and it’s harder for Millennials than Gen X.

“The average amount that a homebuyer can borrow has decreased by 30% since interest rates started rising in 2022.”

Gareth Bryant, political scientist at the University of Sydney, says while Boomers experienced much higher interest rates in the late 1980s and 1990s than currently, young people today struggle to enter the market in the first place.

“Previous generations were able to enter the property market by living frugally and saving their incomes, because price-to-income ratios were lower. Now, these strategies are simply not enough,” he said.

“The biggest challenge facing younger generations is the size of the initial deposit needed to secure a home loan. Even young people with good jobs who could afford to service a mortgage find themselves with a significant deposit gap.”

At the crux of the problem, is a drastic housing shortage.

“Our rapidly growing population is outpacing new housing supply, with new dwelling approvals and construction starts at decade lows,” Ms Flaherty said.

“This means that property prices are going to remain resilient.”

But experts urge Gen Z not to give up.

Homeownership offers security and tax advantages but while the prospect may seem too difficult, the alternative – a lifetime of renting – is even less appealing.

The already-tight rental market is being squeezed further by those unable to buy as well as record levels of incoming migrants, with demand sending rent prices skyward. In March 2024, rental affordability hit its worst level since 2008, according to PropTrack.

The most significant risk for impoverishment in retirement stems from the rental sector, explained Dr Julia Cook at the Newcastle Youth Studies Centre at the University of Newcastle.

“The pension has a built-in assumption that you own your own home. The amount of rent assistance you receive as a pensioner in the private rental market is not enough to actually cover your expenses.”

The great wealth transfer

For the lucky few, they’ll be able to inherit wealth or a home from their parents or grandparents.

With the huge Boomer generation now reaching their late 60s and 70s, Australia is about to witness the largest transfer of generational wealth in its history.

Data from the Productivity Commission predicts that Boomers will pass on $3.5 trillion in inheritance by 2050, with the trend already happening, according to buyers agent Michelle Bay.

“I’m seeing quite a few parents of adult, often-married children contact me on their behalf to source a home,” she said.

James Algar at Mortgage Choice said he’s seeing more activity from the bank of mum and dad than ever in his 23 years as a broker.

“Around nine out of 10 buyers are either staying at home longer to save, or are getting a leg-up in cash to enter the market,” he said. “And the parents who aren’t in a position to offer big chunks of money are more willing now to act as security guarantors.”

But not everyone is so lucky.

“Those who don’t have the luxury of parents to help them are at an automatic disadvantage,” Ms Flaherty said.

“What we’re seeing in Australia is a growing divide between the haves and have nots.”

So what can Gen Z do?

Government intervention could help young buyers in the form of increased investment in housing, faster development applications and reform of stamp duty.

In the meantime, Gen Z needs to form their own homeownership plans.

Shared equity programs, in which the state or territory government pays some of the purchase price, retaining it as equity, offer “a glimmer of hope”, said Ms Cook.

The federal government’s flagship Help to Buy shared equity scheme is currently before parliament, although it’s unclear if the bill will get enough support to pass.

Meanwhile rentvesting – renting where you want to live and buying where you can afford – may also enable people to enter the market sooner.

Otherwise it simply comes down to sacrifice, which means cutting down on spending or taking on more work. And compromise – on both location and type of property.

“Younger first-home buyers generally can’t afford the type of property that their parents were able to afford. So instead, we’re seeing compromises,” Ms Flaherty said.

“We used to think of the family home as being a house with a backyard. For many people now, that’s changed to a unit.

“It’s just coming to terms with just the changing nature of property prices in Australia.”

For Isaac, who has no access to family help, he accepts his first home is likely to be a one-bedroom apartment or studio.

But he remains focused on his goal.

“It’s much more challenging now than what it used to be, but I don’t think there’s really any other sustainable options outside of property ownership.”

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