The PROPERTY DOCTORS, Sydney Australia Novak Properties
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The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1431 THE BANK OF MUM & DAD IS BOOMING - $150 BILLION CHANGES HANDS EVERY YEAR!
The largest intergenerational wealth transfer in Australian history is quietly transforming our property landscape. A staggering $3.5 trillion will pass from baby boomers to younger generations by 2050, with 70% of this wealth tied up in real estate. This isn't some distant future scenario—over $150 billion is already changing hands annually, reshaping housing opportunities for thousands of Australians.
Most surprisingly, the "Bank of Mum and Dad" has emerged as Australia's ninth-largest lender, pumping more than $35 billion yearly into the property market through loans, gifts, and guarantees. While the average inheritance sits at $125,000, those in blue-chip suburbs often receive $500,000 or more. This financial boost has become essential for younger buyers, with 60-70% of first-home purchasers now receiving some form of parental assistance—a dramatic shift from previous generations.
Parental support extends beyond direct cash transfers. Many families use equity in their existing homes as guarantees, typically lasting just 2-3 years until property values rise or mortgages are paid down. This approach allows parents to help without immediately transferring large sums. We're also seeing more multi-generational households forming as families combine resources to secure larger properties accommodating extended family members. However, this assistance often comes with complexity, as parents supporting one child frequently feel obligated to help all children equally.
This wealth shift raises important questions about housing access and equity in Australia. For those with access to the "Bank of Mum and Dad," the path to homeownership becomes significantly smoother. For others, the challenge intensifies. Whether you're planning to help your children, hoping to receive assistance, or navigating the market independently, understanding this massive wealth transition is crucial for making informed property decisions in today's evolving landscape. Have you discussed inheritance planning with your family?
people always talk about getting a start, and something that's slowly rumbling underneath is the bank of mum and dad. There's a massive amount of wealth transition currently happening and particularly towards 2050. We're going to talk about the big numbers in the bank of mum and dad stay tuned.
Speaker 2:Good morning, how are you? I'm good. I'm actually a little bit shocked this morning. We're probably talking about the biggest intergenerational wealth transfer ever to exist.
Speaker 1:It's shocking In the history of Australians.
Speaker 2:Yeah, I would say just in the history of yeah in in australia and and it's all property, sort of property focused. Um, we're talking about 3.5 trillion dollars expected to be transferred from baby boomers to younger generations in australia by 2050.
Speaker 1:3.5 sounds like a long way away. But what's that? 25 years, that's pretty much two generations. Wow, yeah, Wow.
Speaker 2:Yeah, that's big numbers. Correct me if.
Speaker 1:I'm wrong.
Speaker 2:Just start spending it now kids, it'll be fine, everything's going to be all right, but correct me if I'm wrong that is comparable to either the stock market or australian super, which one of the two stock market amazing, you know, when you think of that volume of money is quite astonishing. Um, currently over 150 billion dollars is changing hands every year and that number is expected to grow. So you know it does. It does raise questions. How does this impact the market? Um, and where is it happening? Um, the average austral Australian inheritance is $125,000, but that's the average. You take that to blue-chip suburbs and we're fortunate to live amongst some of the most expensive real estate in the world, on the lower North Shore and the eastern suburbs. Some of those inheritances are $500,000 or more.
Speaker 1:Yeah, it's big. Hey, I would have thought it would have been. You know that, 125 I thought sounded about right, and I guess a 500, I thought was a bit low, but I guess it's going between normally two or three kids. So when you chop it up, you know, a kid's house worth a couple of mil. Chop it between three kids and someone else you love. Bang, bang, boom.
Speaker 2:And from the stats we've been looking at this morning, 70% of that inheritance is tied up in property. So it does mean homes are the primary asset you know that are being inherited to help younger generations enter the market. 70% of that wealth.
Speaker 1:Yeah. So what does that? What does that mean?
Speaker 2:The thank of mum and dad is booming. That's where the headline came from this morning.
Speaker 1:Yeah, don't go to work today, just chukka-sikki, relax. There's more cash, mullah, coming your way from mum and dad. Kids, just take a chill pill, darling. Take a book, a book in a holiday today.
Speaker 2:Do you wanna do you to know a really good fact? This is probably my favourite one so far. Yeah, the bank of mum and dad are now Australia's ninth biggest lender, contributing more than $35 billion annually in loans, gifts and guarantees. How good is that?
Speaker 2:how much, thirty five billion dollars annually Australia's ninth biggest lender is the banker, mum and dad yeah, that's astonishing and you know it doesn't come as a surprise that 60 to 70 percent of first-time buyers um are now receiving some form of financial assistance from their parents and I'm not always talking about how much is that?
Speaker 2:well, 60 to 60 to 70 percent of first-time buyers are now assisting. You know getting some kind of assistance. First-time buyers are now assisting. You know getting some kind of assistance. No, yeah, yeah, it doesn't surprise me, but guarantees are a big thing. Of this as well, you know a big part. They're not necessarily putting the cash down, but you know the loans being guaranteed against the family house, yeah, so so that's it.
Speaker 1:I never realized that it was such a big number of moms and dads are really chipping in for these kids, like very different to generations before.
Speaker 2:Yeah, you know six or seven out of 10 when, when you look at it like that, families would be that is gold.
Speaker 1:That is gold. So so, um, so, mum and dad. So how do we get into mums and dad's pockets? Let's give some. Let's give these. Let's give some people some tips. I think you've given away a good one. The, the guarantee, the guarantor of, of of loans is, is is a really nice path yeah.
Speaker 2:So loans, gifts or guarantees is is one way or another that assistance can be passed down. I think it's a nice thing to do it as well, you know, if you've got the backing of your mum and dad through your first property purchase, um, it went. It went a really long way for me and it actually it was nothing to do with the dollars or cents because there was no money passed through on the purchase, but the emotional support is a big thing. But you can assist kids, or kids can ask for the assistance without asking for money, where either it's like a non-refundable gift yeah, vote of confidence. Um, non-refundable confidence yeah, voter confidence. Or, um, as I said, using the family home as a guarantee against your loan and that comes off once either your property value has gone up 20 or your mortgage has been paid down 20, or both of those things have happened at the same time, so it's not a forever thing.
Speaker 1:Yes, that's interesting. So, um, so there's a lot of cash out there and high level numbers. I know I always rattle around on these numbers, guys, but there's 11 trillion in property and there, um, you know, across australia strata and I reckon that's that's. That's pretty low leverage. That's pretty low leverage. A lot of houses paid off, a lot of mum and dad's okay, but hey, how do those mums and dads feel they? You know, they get the kids past 18, think it's time for themselves, time to enjoy, time to relax a little bit, and then they get sucked right back in with helping the kids.
Speaker 2:Yeah, it's funny. I do talk to some families that are going around helping the kids with first home buyers and they say we can't extend ourselves any further because we've got three kids and whatever we do for the first means we need to do for the other two.
Speaker 1:Good point? I think there's, yes, but having the treating everybody equally is another thing that we do see, with people helping their kids out. That's for sure. That's for sure. So there's a show guys and girls, inheritance is a really, really interesting one. It's real, it's factual. We live in a very lucky country where people get to do this, but we treat it so seriously the whole how, the whole buying a home thing. But you can see how that's propagated itself, like people that were talking around barbecues in the 70s, 80s and 90s, and you know, we do take, take property seriously, and now they're sort of quite quite comfortable yeah, that's right, and this is only going to get you know this bigger picture we're talking about this morning.
Speaker 2:Um, this is only going to get bigger. You know 150 billion dollars changing hands every year, but by 2050, you know it's going to be even more. So watch this space yeah, wow, all right.
Speaker 1:So, kids, um, go knock up mum and dad tonight, take him to dinner and um and ask them for a stack of money, because that's what everyone's doing and you know, that's that's what you saw in novak. Novak morning minutes look.
Speaker 2:I hope this helped Even just bring things to light for you.
Speaker 1:Yeah, and before we go I just want to go back on something you mentioned, billy. Mum and dad will often feel that if they're helping their kid to buy something for 700 grand, that they're in the hole for 700. Mum and dad are in the hole as much as their child, but I liked what you said. If mum and dads are helping the kids, it's really that first 20% that the bank are interested in, that later 80% the bank will look after. So, mum and dad, if you're buying something for 700 grand with your kids, and well, they're buying it and you're helping them, there's 20% of that is 140 grand. That's really where that's because it's. But then again they're getting around that now with LMI and stuff like that, with not paying any lenders, mortgage insurance and all that stuff that's coming through.
Speaker 1:So, but normally, yes, I guess if they're past that first home buyer thing, that 20 is 140 grand. Um, as soon as you've got that in equity in that property, um, you can leave the kids on their own. So it's probably more like when they're buying a two-bedroom unit or when they're buying a house that that 20 becomes a little bit more apparent, a bit more real yeah, that's right and and we are like we are finding a lot of property transaction.
Speaker 2:It is multi-generational now the grant, you know the parents are moving in with the kids and therefore the home needs to be bigger and it needs to accommodate more than just a family of four. Um, there are, there are transactions happening like that, but for the first home buyer stuff, the entry level, yeah, you'd be surprised. The guarantee is normally in place for two to three years and that's a combination of the market going up and the mortgage being paid off and quite quickly it disappears billy drury, the old man um stuck in a young man's body.
Speaker 1:Thank you very much have a lovely day.
Speaker 2:Thank you for your time. Take care bye.