The Bank of Mum & Dad – Intergenerational transfers and first-time homeownership in Australia

Around 70 per cent of Australians reside in owner occupied housing. Recently however, ownership rates have begun to fall, especially for younger cohorts, driven in part by higher house prices. Given the important role of housing in the context of the tax and transfer system, if younger Australian are less likely to enter into homeownership over time this is likely to be of concern to policy makers. There is some anecdotal evidence that transfers from parents are an increasingly important mechanism to facilitate entry into homeownership. In this paper we consider the relationship between transfers in the form of bequests and inter vivos gifts from parents, and, entry into first-time homeownership. The empirical analysis indicates that bequests and inter vivos transfers hasten entry into homeownership, potentially alleviating some important liquidity constraints faced by households. There is also some evidence that transfers are used to reduce the amount borrowed by first-time buyers and increase the value of housing purchased.