Saving for a deposit has become a significant challenge for young people, driven by soaring property prices, high cost of living and competition from investors.
While it might feel like everyone else is boosting their savings with the Bank of Mum & Dad, the big question is whether it is possible to achieve homeownership on your own.
It comes down to setting a realistic budget, identifying opportunities and utilising government assistance. And, of course, cutting back on spending, which can be difficult when everyday living has become so much more expensive. A survey released by financial comparison site Canstar shows people are typically putting away an average of $724, down from $1605 back in 2023.
Let’s look at some of the strategies for taking that first step onto the property independently.
Does everyone have assistance from their parents when buying a house?
The Bank of Mum & Dad has always been a part of property markets but it’s become more popular over the past decade driven by rising property prices, deteriorating affordability and strict lending criteria.
It is particularly popular in more expensive capital cities such as Sydney, Melbourne and Brisbane where the cost of entry-level property is steep. It also occurs in regional areas where price growth has been strong and competition fierce.
While a loan from the Bank of Mum & Dad is seen as a bonus, Mr Chapman said many young people see it as a last resort and want to try to buy property independently.
Parents are looking for other alternatives to help their offspring onto the property ladder, such as paying off their HECS debt or allowing them to stay at the family home rent-free.
“A deposit is a lot of money and many parents will not put their retirement at risk to help their kids,” Mr Chapman said.
“The reality is that not all parents have that cash just lying about, and they might have to go to their bank to get the money, then there is an interest cost, and you have to work out who pays for it. They come from an era where they bought a property on their own and they expect their children to do it the same way.”
Finding a guarantor for your first home
More popular than gifting money, some parents may offer to help their child secure a loan by offering part of their property or assets as security. This reduces the lender’s risk and allows young people to borrow more or avoid paying lenders mortgage insurance.
Parents can sign a limited guarantee, which means allowing a certain percentage of their property should their child default on their loan.
“A limited guarantee safeguards parents and protects them from losing their own property, which has made it more appealing but it is still such a small number in the market,” Mr Chapman said.
“While parents want to help their kids, they may want to take the cash out of their savings or take out another loan; it just means they can put up the equity that is just sitting there doing nothing.”
In this instance, it is recommended that both parties seek independent legal advice.
Buying a property with a sibling or friend
Another way to fast-track the pathway to home ownership is to buy a property with a sibling or friend. Agent Asha Kerr from LJ Hooker Mona Vale said they have been seeing an increase in multi-generational living on Sydney’s Northern Beaches. This is sometimes partially funded by parents or independently.
It is essential to seek legal advice should one of the parties need to sell or the relationship breaks down.
“It is always a good idea to trial the situation - I always suggest going and giving it a whirl so they know what they are getting into before committing financially to a mortgage,” Ms Kerr said.
Are there property markets that are affordable without the bank of Mum & Dad?
LJ Hooker Head of Research, Mathew Tiller said regional areas and smaller capitals like Darwin and Hobart. These markets are more affordable and therefore require smaller deposits and entry points.
“Softer price growth, wage growth and falling interest rates will provide some relief for those savings for a deposit in 2025,” Mr Tiller said.
Affordable suburbs with new infrastructure, transport links and housing supply may offer some potential for rentvesting.
This allows a young homebuyer to purchase property in a less expensive area as an investment and rent where they want to live. Suburbs identified as good potential for investors include Amaroo in the ACT, Blacktown in Sydney’s West, Toowoomba in Queensland and Busselton in Western Australia.
Pathways to homeownership without the bank of Mum & Dad
For those without family support, options include leveraging government schemes, co-ownership arrangements, or purchasing in more affordable locations and trading up over time. It is important to know what first homebuyer grants are available as these vary across the country.
Paying down debt, maintaining good credit and increasing income by taking on a second job can also help towards saving a home deposit faster.
Ready to take the first step toward owning property without relying on the Bank of Mum & Dad?
Consider exploring more affordable markets or the suburbs mentioned above - places where you can begin building your property portfolio from the ground up. By assessing government incentives, trimming costs, and carefully selecting the right location, you can secure a property in today’s competitive market.
DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.
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