Millennials charging the property market, but could face long-term pain


Millennials are currently powering ahead in the Australian housing market, despite the global health crisis and subsequent recession in Australia.

Growth in first-home buyer enquiry on continues to grow and is now starting to show up in housing finance data from the Australian Bureau of Statistics.

With record low interest rates, a plethora of first-home buyer incentives from the Federal Government and less competition from investors, it has never been a better time for first-home buyers to step into the property market – but how positive is the long-term outlook for this new wave of house hunters?


First-home buyers are dominating the property market, but it is mostly being driven by government incentives. Picture:

Why it’s a good time to be a first-home buyer

There is a suite of incentives on the table for first-home buyers at the moment:


5% deposit scheme

The Federal Government’s 5% deposit scheme was launched in January 2020 and has been a solution to the most common challenge first-home buyers face – getting a deposit together.

Under the scheme, first-home buyers only need to save 5% of the 20% needed to avoid Lenders Mortgage Insurance (LMI) and the Federal Government will guarantee the rest.

State government stimulus

Added to this is a wide range of state government incentives ranging from cash for new homes to stamp duty concessions. The more recently launched HomeBuilder package doesn’t specifically target first-home buyers, but has been popular with this buyer group, driving up house and land purchases.

The $688 million package aims to provide 27,000 grants of $25,000 by December.

Low interest rates

Another factor is the availability and cheap cost of finance with interest rates at record lows – and expected to stay that way for some time.

First-home buyers accounted for almost a third of all owner-occupier home loans in July, up from a quarter a year ago. These buyers are usually some way away from their peak earning years and being young, typically have a lot longer to pay off home loans.

For banks, this, along with the potential to capture long-term brand loyalty, makes them desirable borrowers.

Investors are pulling back

A lack of investor activity in the market is also a positive for first-home buyers. When investor activity was very strong, there was very little first-home buyer activity as competition between the two groups was fierce and prices were rising sharply.


But the long-term outlook is bleak for young people and housing

While millennials are propping up the housing market at the moment, COVID-19 will likely have a negative impact on the financial futures of many young home buyers.

Long-term job losses


Job losses across the hospitality, tourism, retail and education sectors have had devastating financial impacts for young people. Picture: Getty

The health crisis clearly has deadly consequences for the elderly, but business shutdowns across major industries such as retail, hospitality, tourism and education are having devastating impacts on the livelihoods of young people, which could last for years to come.

While it’s not unusual for the youth unemployment rate to be higher than that for the population as a whole, the gap is likely to become the widest it have ever been post-pandemic.

Swathes of job losses among Australians under 30 following lockdowns in mid-March put immediate stress on the rental market, as many renters – who largely fall into this age bracket – were forced to leave their homes because they couldn’t afford the rent. For young Victorians, the second, stage four lockdown was a double blow.

Rental prices have dropped as a result of an oversupply of vacant properties, but it isn’t much help if you are struggling to find employment.

House prices are not dropping

The second problem for young people and housing is that we are not seeing the affordability gains that would normally come with a recession. Prices have remained surprisingly resilient during the pandemic, buoyed by very low interest rates, lower rates of job loss among older people and very high levels of savings.

Unless house prices drop in the coming year, first-home buyer may still find it difficult to break into the market.


Property prices have remained resilient during the pandemic. Picture:


It might be better to hold off

Millennials are currently holding up the property market but it is highly government incentive driven.

If you are a young person, employed in an industry that has become highly unstable due to COVID-19 shutdowns, renting or hoping for greater housing affordability now is not a great time to be in the housing market.

While securing finance is an important part of a successful property journey, long-term stability is most definitely key.

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