The bank of mum and dad is changing for many.
More parents helping their children get a foot on the property ladder are choosing to offer guarantor loans over cash gifts, industry experts say.
Financial support from the bank of mum and dad has helped many buyers secure a home in the booming property market post-Covid.
But the rapidly rising cost of living has made it harder for parents to offer their children cash.
Propsavvy buyers’ agency founder Cory Harding said he had noticed more parents going guarantor to help their children secure a home in Adelaide.
“That’s one of the factors as to why the market isn’t going to slow down,” he said.
“I know someone whose mum has some $700,000 to $800,000 in equity she’s going to help her son use to build a property portfolio and he wants to buy three properties.
“So what we’ve got to understand is when people ask ‘how can people afford these prices?’, it’s because if you bought in 2020, let alone the people that bought 15, 20 or 30 years ago, if you bought in 2020 you’ve at least got $300,000, $400,000 or $500,000 in equity potentially that will allow you to buy one to two more properties, and that will fuel the demand because the prices will keep going up.
“And on top of that we have such a lack of supply.
“In Redwood Park, in the northeastern suburbs, for example, some weeks there is only one listing available on realestate.com.au – there’s such a lack of supply.
“Now it’s got to the point where everything is selling before they’re being built as well – it’s just crazy.
“That’s one of the factors as to why demand won’t slow, because people are increasing their equity position which is allowing them to go again.
“At the end of the day that’s going to reduce the middle class and you’ll have extremes – people who are really wealthy asset wise and people who don’t have the money to get in.”
Ray White SA chief executive Matt Lindblom had noticed it too.
Ray White’s Matt Lindblom. Supplied.
“The banks don’t love mum and dad being guarantor … it’s definitely happening more now though,” he said.
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“Guarantors are very popular because people are more asset rich instead of cash rich.
“Because of the property boom, people have become asset rich as a result.”
Mr Lindblom said many parents’ homes were worth more now than they were a few years ago but the rising cost of living meant they didn’t necessarily have as much spare cash to share.
He said going guarantor was a risky move that could turn “ugly” but also one that could prove beneficial.
Many families felt it was their only option at the moment, he said.
Buyer’s Agent Melinda Jennison. Supplied
Meanwhile, Real Estate Buyers Agent Association of Australia president Melinda Jennison said there had been a steady rise in first-home buyers whose parents were choosing to pay for buyers’ agents to help them compete instead.
“It’s a shift that reflects a broader move toward more strategic forms of intergenerational support in a market where competition, complexity and price pressure remain high,” Ms Jennison said.
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“Parents are looking for ways to help without taking on the exposure that comes with going guarantor or providing large cash gifts.
“For many, covering a buyers’ agent’s fee feels like a practical, upfront investment that gives their children expert guidance from the very start.”
– with Viva Hyde
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