Did baby boomers really win the housing lottery?

It’s a generational debate that continues to rage as Australian house prices rise and rise.

Baby boomers weathered crippling interest rates that peaked in 1990, when mortgage repayments devoured half a family’s income.

But they also bought homes for just three to four times their annual salary.

Today’s buyers are saddled with a home costing nine to 11 times their income, as the median house price goes past $1m and wages struggle to keep pace.

The generational divide runs deeper than dollars and cents.

While boomers started small and traded up, benefiting from free university education and numerous property booms, today’s first-home buyers battle student debt, soaring rents and the need for massive deposits. Yet they also live longer with their parents, are better educated, can access great first-home buyer incentives and have time on their side. Oh, and there are trillions of dollars of boomer wealth heading their way.

It’s common for the younger generation to throw barbs at the older generation for having an easier ride. It’s often met with chagrin from those aged 60 or older who remember doing things very, very tough, especially after interest rates galloped to an eye-watering 17.5 per cent in 1990.

Metropole Property Strategists founder Michael Yardney says there is tension and jealousy towards boomers because owning property is deeply emotional.

“Young people are frustrated because they feel like the rules of the game changed just before they got a chance to play,” Yardney says.

“And boomers often feel they’re being unfairly blamed, despite many working hard and making sacrifices.”

Yardney says baby boomers make up 26 per cent of Australian households but own more than 50 per cent of owner-occupied housing.

“While they faced higher interest rates in the 80s and early 90s, with mortgage rates peaking at over 17.5 per cent in January 1990, they also had significant structural advantages that made entering the property market much easier overall,” he says.

“Back then, the average property cost just three to four times the average annual income. Today, in our major capitals, it’s closer to nine to 11 times income and rising.

“Boomers experienced strong wage increases that outpaced inflation and home prices, allowing them to pay off their homes faster. They had better job security, full-time employment was more accessible and many received free university education, meaning no student debt weighing down their borrowing capacity.”

According to the Real Estate Institute of Australia, in 1980 – a peak boomer home-buying period – median house prices were $64,800 in Sydney, $41,500 in Perth, $40,800 in Melbourne, $36,300 in Adelaide and $34,500 in Brisbane. At that time, average full-time earnings were $250 a week or $13,000 annually, Australian Bureau of Statistics figures show.

Today’s average annual full-time wage tops $104,000 and the median capital city house price is $1.08m. House prices vary from state to state, of course, with Sydney’s median now sitting at $1.56m, Brisbane $1.07m, Melbourne $983,000, Perth $926,000 and Adelaide $916,000, according to new PropTrack data.

Boomers had a brief period of intense mortgage pain in the late 1980s and early 90s when interest rates hit 17.5 per cent and, according to the ABS, home loan repayments swallowed 50 per cent of a family’s income. But for most of the past 25 years mortgage rates have been much lower at about 5 to 7 per cent.

Today, repayments for a typical $600,000 mortgage cost about $3700 a month, or $44,400 annually. In comparison, a $50,000 mortgage in 1990 meant repayments were $573 a month, or $6876 annually.

Yardney says while many baby boomers did find it tough, they had lower expectations and were willing to start small and trade up later. He says they had to climb a hill to get housing, but today’s young buyers have to “scale a cliff”.

Fellow boomer, author, investor and former chairman of Property Investment Professionals Australia Peter Koulizos agrees.

“As much as I hate to admit it, the answer is yes – it is harder for the younger generations,” Koulizos says.

“The hardest part is the deposit for younger ones. Because house prices were so much lower relatively, it was easier for us to come up with a deposit.”

With a median house price today above $1m and median weekly rents near $650, it can take many years for young people to save a traditional 20 per cent deposit, or even the 5 per cent deposit allowed by the federal government’s first home guarantee scheme.

Koulizos says a key benefit for buyers today is the collection of “fantastic incentives” that help first-home buyers get into real estate such as government grants, stamp duty relief and low-deposit schemes.

The biggest incentives relate to new home builds, he says.

“Young people can still get in easier than other generations if they buy brand-new and take advantage of the incentives,” Koulizos says.

“Most states have no stamp duty on new properties for first-home buyers. I try and hold back because I don’t want to sound like a grumpy old man, but if you are specifically looking for a brand-new home, it’s actually easier.”

He also says younger people have higher expectations and are less willing to forgo luxuries than their parents once did.

“The homes that people are buying today are bigger and of a higher spec than the homes that were bought 40 years ago. Then, you would put newspaper on the windows until you could afford the blinds. Today, it must have airconditioning already in.

“You can sit back and say it’s too hard, but if you make a few phone calls and search the net, there are many ways to get into your first home. And remember, it doesn’t have to be your dream home or your final home.”

MBA Financial Strategists director Darren James says younger generations have more lifestyle expenses.

“We are in an environment where we buy convenience and spend a lot of money,” he says.

“Most families would have three streaming services, iPhones and iPads. They were never even expenses back then.”

But James says strong house price growth in recent years reinforces the fact younger generations are doing it much tougher.

“Something’s got to give at some stage and normality will return,” he says.

James says the discussion about baby boomers and housing “comes up a lot with clients and staff”.

“It’s mainly boomers being concerned about their kids being able to buy a house,” he says.

Some people from younger generations have an expectation of a big inheritance coming their way, “which boomers didn’t have”.

“Boomers’ parents went through the Depression, so there wasn’t the same expectation,” James says.

There are views among some older Australians that younger generations need to toughen up and focus more on saving for a deposit.

Oracle Lending Solutions managing director Angelo Benedetti says boomers “definitely” had it easier but also had a better savings mindset, whether it was for a new television or a house. They had fewer financial distractions.

“Young kids are not taught the discipline required to get them into the property market,” he says.

“People are doing it harder, but a lot of it is imposed on themselves.”

Yardney says without help from the bank of mum and dad, millennials and Generation Z will continue to be priced out of the market.

“Boomers were in the right place at the right time,” he says.

“Gen X is squeezed between helping their kids and funding their own retirement. But millennials and Gen Z are staring at a steep property ladder with fewer rungs. That said, they still have the greatest asset – time – on their side.”

This article first appeared in The Australian as Did baby boomers or millennials have it harder buying a home? Here’s our verdict