Ari Sharp is one of the lucky Australians who is not obsessed with house prices — her parents already own four properties that she knows she’ll inherit one day.
The 30-year-old single mother from Victoria can’t afford to buy her own home but knowing an inheritance is coming has eased the financial pressure.
“It’s taken the edge off the need for security in buying a house of my own, separate to whatever the rest of my family owns,” she told SBS News.
It has also given Ari the freedom to explore career paths that are not necessarily financially lucrative.
“I’ve had the freedom to explore things that I actually want to do,” she said.
Ari is one of many young Australians who feel increasingly locked out of the housing market and believe they may have to wait for their inheritance in order to own property. Many are openly discussing this possibility with their friends and family.
Analysis by University of NSW professor Hal Pawson found house prices in Australia had tripled between 1990 and 2020, while real earnings only increased by 50 per cent.
House prices in Australia have tripled while wages have only increased by 50 per cent. Source: SBS News
NSW resident Alan, who did not want to use his real name, said he felt “terrible” that he was now relying on his inheritance to own property.
The 43-year-old blames “laziness and stupidity” for not buying his own place earlier as he was busy raising two children and also lost money due to a recent divorce and issues with a dodgy workplace.
He says his inheritance money is always in the back of his mind now when he sees his mum.
“You know the only way you’ll get your inheritance is if that person in front of you — who you love — dies,” he told SBS News.
“How would that make you feel? Because that’s how I feel and it’s pretty rubbish.”
‘No one wants their parents to die’
Sydney resident Alison, who also wished to remain anonymous, said she felt “dejected” after calculating it would take her 27 years to save the deposit for a median-priced house in Sydney — which is around $1.5 million.
Even though the 22-year-old — who earns $75,000 a year — has plenty of time to save, she has started to think about her inheritance.
“[I started to think] the only way I’ll ever be able to afford a house before the age of 50 is [if] one of my parents dies and I get an inheritance,” she said.
While Alison acknowledged there were other options — such as buying a unit, which would be cheaper — she said her parents bought a house when they were her age without having to save for almost 30 years.
[I started to think] the only way I’ll ever be able to afford a house before the age of 50 is [if] one of my parents dies and I get an inheritance.
Alison (not her real name)
“The thing that sucks is that no one wants their parents to die but for a lot of people in my generation, getting an inheritance is going to be the only way many of us will be able to afford a home,” Alison said.
“It’s just awful that people can’t afford to own a house without having to rely on inheritance … I think it’s unfair and it makes me really upset.”
Get set for the great wealth transfer
Griffith University researchers estimate Australians are set to inherit an estimated $3.5 trillion over the next 20 years, in the greatest wealth transfer in the nation’s history.
On average, each recipient is expected to inherit around $320,000.
Andrew Inwood, global chief executive officer of market research company CoreData, described baby boomers as “the wealthiest generation that have ever existed”.
Australia’s four million boomers, generally considered to be those born between 1946 and 1964, are estimated to hold around $4.9 trillion in wealth, according to CoreData analysis.
The wealthiest 2 per cent, consisting of 78,300 individuals, were estimated to have an average of around $2.6 million in assets each, according to modelling done in November 2023. The rest had around $400,000 each in assets.
Baby Boomers hold $4.9 trillion in assets according to CoreData analysis. Source: SBS News
“[Boomers are] moving into retirement relatively rapidly. The youngest [are around] 60,” Inwood told SBS News.
“[This money is] going from being saved and stored, to being spent and then passed on … to the next generation.”
The money this generation will leave behind could drive significant change in Australia’s economy and housing market.
For those who are in line to inherit, this is welcome news, and many Australians are already changing how they live with this in mind.
Inheritance could push up property prices
Experts believe the trillion-dollar wealth transfer could drive property prices even higher.
A 2021 Productivity Commission report on wealth transfers in Australia predicted the value of inheritances could increase fourfold within 20 years, as household wealth grows and the population ages.
In 2018, an estimated $120 billion was passed on through wealth transfers – including $107 billion in inheritances and $13 billion in gifts – more than double the amount in 2002.
The amount far exceeded the Australian government’s entire expenditure on health, which was $80 billion in 2018/19.
Estimates show the value of the average inheritance rose from about $85,000 in 2001/02, to $125,000 in 2018/19.
The median inheritance was just $45,000 in 2018/19, meaning most people got less than $50,000.
Studies have found that receiving a wealth transfer is linked to higher rates of home ownership.
Johnathan McMenamin, a senior economist at financial services company Barrenjoey, believes the incoming wealth transfer will make it harder for those without access to family money to buy a house.
“Unfortunately there is a very low level of supply of housing at the moment and so when your marginal buyer in the housing market has access to inherited wealth, then the price of that house can lift quite substantially,” he told SBS News.
When your marginal buyer in the housing market has access to inherited wealth, then the price of that house can lift quite substantially.
Johnathan McMenamin, Barrenjoey senior economist
If governments do not make any other changes to housing policy, Inwood agrees inheritances could lift property prices, or at the very least they could keep prices high.
He said there had already been a “noticeable trend” among older baby boomers who had died, of giving their money to their grandchildren instead of their children in recognition of how difficult it is for them to buy a house.
“[The grandchildren] are the ones that need the most help because asset price inflation has really impacted their ability to get housing,” he said.
‘Choices will be framed’ around inheritance
Monash University professor of youth studies Lucas Walsh said the expectation of an inheritance was “warping the plans of young people”.
“Planning to have an inheritance will actually affect the social fabric of Australia moving forward because choices will be framed around this idea that one will get money,” he told SBS News.
Waiting for an inheritance could also impact other life choices such as when to start a family and how young people navigate their early years in the workforce, he said.
Planning to have an inheritance will actually affect the social fabric of Australia moving forward because choices will be framed around this idea that one will get money.
Professor Lucas Walsh, Monash University
But he added that there were also downsides to waiting for an inheritance, which is not guaranteed and could be decades away at a time when the housing market may have changed.
Ari knows her inheritance is not guaranteed but believes she will deal with that in the future if she has to.
“Anything could happen, illness could happen, disability could happen — anything that requires [my parents] to use their assets,” she said.
Ari Sharp with her daughter. Source: Supplied
Help can come with ’emotional baggage’
Simone (not her real name) is also relying on her parent’s generosity but wishes she didn’t have to.
Her mother owns three properties and Simone is currently living in one of these in Queensland with her two children.
“There’s a lot of emotional baggage that comes with it all so as grateful as I am, it’s also frustrating at times,” she said.
Simone said it was often “tricky” to deal with the strings attached to living in her mother’s house. Her mum makes suggestions about improvements she wants on the property, or offers comments discouraging Simone from buying her own place. They have a difficult relationship as her mum also has an alcohol addiction.
“If the tables could be turned and I could just have a happy family, I would prefer that over any property,” she said.
If the tables could be turned and I could just have a happy family, I would prefer that over any property.
Simone (not her real name)
But the fact that Simone is paying below-market rent and doesn’t have to save for a house deposit means she can spend money taking her children out to theme parks and other activities. She can also rebuild her savings after a short period of unemployment.
She feels bad for others who don’t have something to fall back on.
“[It] would be really hard in the current situation, especially with the rental crisis,” she said.
Will the wealth transfer make inequality worse?
The Productivity Commission does not believe inheritances will worsen inequality in Australia because even though the dollar value of assets wealthier people receive can be high, they make up a lower percentage of their existing wealth.
Productivity Commissioner Lisa Gropp said people were on average around 50 years old when they received an inheritance and this limited their impact. Gifts given earlier in life also tended to be smaller in value.
She said intergenerational wealth persistence could be mostly attributed to other things parents give their children, such as “education, networks, values and other opportunities”.
But Walsh disagrees and is worried inheritances could make inequality worse because certain groups — such as those who leave school early, have a disability, live in a regional area or are from an Aboriginal or Torres Strait Islander background — tended to fare worse than others across time.
“The wealth transfer could have significant implications for divisions within class — those who are in property and those who aren’t,” he said. “And young people are acutely aware of this.”
‘Giant slog’ for those not able to rely on parents’ wealth
Nate Pedrotti, 27, is one of the many Australians with no inheritance to look forward to.
He said his dad was in debt and he’s not on good terms with his mum. His girlfriend is also not expecting to receive anything.
The couple wanted to buy a three-bedroom place as they have three cats and also work from home but their $450,000 budget wasn’t enough. Even a townhouse in the northern Melbourne suburb of Reservoir was around $800,000.
“The deposit is nearly impossible to save up for when you’re renting, and then the mortgage repayments as well are just through the roof,” Nate said.
Nate Pedrotti does not think he’ll be able to buy a house anytime soon. Source: Supplied / Charis Chang
He said the couple had “kind of given up” on buying property in the near future.
“It’s going to be a giant slog and probably impossible anyway,” he said.
They are now looking to invest in index funds and other products that could give them a higher return on their savings.
Since resigning themselves to being renters, Nate said the couple had not been saving as aggressively and were prioritising other things like travel.
“It’s made me very nihilistic and think, ‘Well, what’s the f—ing point?’ Because I’m not going to get there anyway. And if I do, I’m going to have to give up every skerrick of pleasure and enjoyment in my life, and what’s the point in that?
“I think it’s very, very unfair [and] I don’t feel like I have any way of changing it.”
