The generational wealth divide has significantly impacted the ability of first home buyers to purchase a home, creating a stark contrast between older and younger generations in terms of property ownership and financial stability.

Here’s a closer look at how this divide has manifested and its implications for first home buyers:

Rising Property Prices

In many parts of the world, including Australia, property prices have surged over the past decade. This increase in property values has benefitted older generations who bought homes when prices were relatively low. In contrast, younger generations face the challenge of saving for a deposit and securing a mortgage in an environment where property prices are much higher relative to incomes.

Wage Stagnation vs. Inflation

While property prices have increased, wages for many have not kept pace with inflation. This wage stagnation makes it difficult for first home buyers to save enough for a deposit, especially when considering the high costs of living, education, and other financial commitments. The disparity between rising living costs and stagnant wages exacerbates the wealth divide, leaving younger people with fewer resources to invest in property.

Inherited Wealth and Financial Assistance

Many first home buyers today rely on financial assistance from their parents or inheritance to afford a home. Older generations, who have accumulated wealth through property appreciation and other investments, are in a position to provide this support. However, not all young people have access to such financial help, leading to unequal opportunities based on family wealth.

Changes in Employment Patterns

The gig economy and the rise of non-traditional employment patterns have also impacted younger generations. Unlike older generations who often had stable, long-term employment with benefits, many young people today work in more precarious, short-term, or freelance jobs. This lack of job security and steady income can make it harder to qualify for a mortgage and save for a home.

Government Policies and Housing Supply

Government policies and the availability of affordable housing also play a crucial role. In some regions, policies favoring investors and existing homeowners can drive up property prices, making it harder for first home buyers to enter the market. Additionally, a limited supply of affordable housing further restricts options for young buyers.

Social and Cultural Shifts

There are also social and cultural factors at play. The aspirations and priorities of younger generations may differ from those of their parents. Some may prioritize experiences and mobility over homeownership, while others may be discouraged by the high barriers to entry in the housing market.

The Psychological Impact

The generational wealth divide also has psychological implications. The pressure and stress associated with trying to buy a home in a challenging market can impact mental health and well-being. The sense of falling behind or being unable to achieve what previous generations did can create feelings of frustration and hopelessness among first home buyers.

This Needs to Change

The generational wealth divide is a complex issue that affects first home buyers’ ability to purchase a home in numerous ways. Addressing this divide requires a multifaceted approach, including policy changes, financial education, and efforts to increase affordable housing supply. Bridging this gap is essential for ensuring that homeownership remains an attainable goal for future generations.

If you’re a first-home buyer looking to enter the property market we are here to assist you optimise your purchase. Please reach out to the Kitty & Miles team today. Email support@kittyandmiles.com.au