Have Gen Z given up on owning their own home?

However, with a recent rate cut of 0.25% - the first since November 2020 - there is light at the end of the tunnel for young first-home buyers considering getting onto the property ladder.

Gen Z, born between 1996 and 2009, are the youngest Australians getting into real estate, and although the economic cards are stacked against them, experts say the right property plan and realistic expectations could get them where they want to be.

Released each quarter, the Mortgage Choice Home Loan Report highlights home loan trends, plus the intentions of borrowers and prospective buyers with a breakdown of generational sentiment. 

The hurdles are real

Only 4% of Gen Z respondents said they experienced no hurdles on the road to buying real estate. That’s compared with 34% of Millennials, 57% of Gen X, and 70% of Baby Boomers who felt they didn’t experience any roadblocks. 

“It’s understandable that Gen Z face the most hurdles when buying property given buyers in this age group are usually buying property for the first time. Purchasing a property can be a daunting process, especially for those who’ve never done it before, which is why it’s so important to speak to a mortgage broker early in the process,” said Mortgage Choice chief executive Anthony Waldron.

“Although sentiment is on the rise, it is clear consumers are facing hurdles on their journey to property ownership, such as high property values, lack of affordable property supply and uncertainty around how to negotiate when making a purchase.”

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The top three most critical housing-related issues cited by Gen Z in the report were; making housing more affordable (66%), more support for first-home buyers (38%), increasing the number of homes available (34%).

Confidence on the horizon

According to the report, buyer confidence is brewing among young Australians who are prepared to take charge of their path to property. The survey revealed an uptick in the proportion of Australians planning to buy property independently. While 40% of potential purchasers said they plan to go solo, a generational breakdown showed this was highest among Gen Z at 51% – up from 46% last quarter.

PropTrack's Home Price Index data shows values have also been softening, which in turn has boosted buyer confidence.

“This softening in growth has occurred alongside a surge in stock for sale, giving buyers more choice and reducing the urgency to transact. Affordability challenges, weaker economic conditions and the sustained higher interest rate environment have also been contributors to slowing – and reversing – growth,” said REA Group senior economist Eleanor Creagh.

REA Group senior economist Eleanor Creagh says the housing market will see renewed demand and price growth this year. Picture: supplied

With one rate cut already recorded, and potentially more around the corner, she added that values could rebound but are unlikely to boom.

“As interest rates move lower this year boosting borrowing capacities, improving affordability and buyer confidence are expected to drive renewed demand and price growth," she said. "However, the stretched starting point for affordability will likely dampen the uplift in prices compared to prior easing cycles, resulting in the pace of home price growth trailing the strong performance of recent years.” 

Having realistic expectations

Gold Coast-based Mortgage Choice broker Deslie Taylor said first-time buyers who understand the current buying climate are setting themselves up for a positive move forward.

“It’s expectation versus reality. Many 20-somethings have the expectation that they want a house with the white picket fence; they're looking for their forever home right now,” she said.

Mortgage Choice broker Deslie Taylor says Gen Z often think too far ahead when trying to purchase their first property. Picture: supplied 

"But once I've had a conversation with them, they get a better sense of reality and realise that his first purchase a stepping stone. It might not be in the location they want to buy-in, it may not be the size they want and they’re not going to be there forever.”

She said savvy first-home buyers recognised that housing affordability is less about the purchase price and more about the serviceability of a home loan.

“It's not about how much they can afford to borrow, it's about how much they can afford to pay back. Just because they can borrow certain amount, doesn’t mean their lifestyle will enable those repayments comfortably.”

She said her job is to help inexperienced buyers get their financial ducks in a row and consider all the obstacles that life can throw at future mortgage holders in the early years of a home loan, from cost of living increases and interest rate changes, to even starting a family.

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“The majority of my young clients don’t feel defeated. They walk out of our meetings with options. They might not be getting their dream, but they feel empowered that they have choices and a plan. They might not be able to buy straight away; it might be in six months or even a year away, but they have options.”

The great Australian dream continues

McCrindle Research has delved into what each age group wants in its Generations Defined study and discovered that a home is a top priority for 20-somethings.

“We looked at the top hopes that Gen Z have for their life. Every year, despite the increasing cost of housing, it always comes out that the great Australian dream of home ownership is alive and well,” said social researcher Ashley Fell.

“The latest research found 63% of Gen Z want to own their own home one day, followed by having full financial freedom and independence, and after that was seeing the world.”

While the aspiration of homeownership is buoyant, she added that respondents were also realistic about the obstacles.

“The inverse of that is their top fears. The biggest worry for Gen Z is they won't have enough money to live comfortably, the second is never being able to buy their own home. So there's the goal to own property, but also an awareness of the challenges.”

Ms Fell added that Gen Z is fast becoming known as a generation of go-getters who are prepared to hustle to get what they want.

“We asked Gen Z what word they would use to describe themselves and those that most resonated were; independent, determined and creative. Gen Z are having to make sacrifices these days, but they’re looking at creative ways to enter the market, whether that’s rentvesting, purchasing a property with family to split the cost.

"With the gig economy it's never been easier for them to start a side hustle and say ‘okay, what do I need to do to achieve my goals?’ Whether that’s homeownership or a holiday."