Soaring property prices push ‘forever home’ further out of reach

A new report has uncovered a generational shift in the way Aussies approach their first property, suggesting the ‘forever home’ may be a thing of the past.

When first entering the market decades ago, Baby Boomers would look for a home with the intention of staying put for life. But in a sign of the times, younger generations are ‘stepping stone buying’ to get whatever they can afford.

The findings in the latest Mortgage Choice Home Loan Report has revealed a distinct generational divide in the way buyers view their first home.

It found ‘stepping stone buying’ is on the rise with one in two Millennial (54%) and Gen Z (47%) borrowers viewing their first purchase merely as a way to get onto the property ladder, as they hold out hope to buy something bigger and better down the track. That compares to 35% of Baby Boomers.

Instead, 41% of Baby Boomers purchased their first property with the view of it being their ‘forever home’, compared to just 17% of Gen Z buyers and 31% of Millennials.

At the same time, just 9% of Boomers bought a ‘fixer upper’ compared to 22% of Gen Z and 19% of Millennials. It comes as competition for fixer upper homes heats up as buyers look for ways to get into the market at a discount.

The purchasing intentions draws on home loan submission data from Mortgage Choice and a nationally representative survey of 1000 consumers. The report highlights home loan trends, as well as intentions of Australian borrowers and prospective buyers.

It’s hardly surprising that younger generations are desperate to find a way into the market given that property prices continue to gallop away from first-home buyers.

National property prices reached a new record high in July according to the latest PropTrack Home Price Index, gaining more than $40,000 in the past year – and by hundreds of thousands of dollars in dozens of suburbs across the country.

Mortgage Choice CEO Anthony Waldron said younger generations were more often seeing property as an investment strategy.

“Our survey findings reveal the rise of ‘stepping stone buying’ or strategic property purchases, with a third of Gen Z buyers sharing they’re motivated to buy property as an investment,” Mr Waldron said.

“And while 41% of Baby Boomers bought their first home with the intention of staying put for life, 54% of Millennial mortgage holders saw their first purchase a stepping stone to get onto the property ladder and make progress toward their ultimate goal.”

Foot in the door

The stepping stone buying trend is increasingly common, according to NSW Mortgage Choice broker Rob Lees. He recalls dealing with Lachie and Bec, a Gen Z couple who bought their first property in 2023.

“They knew when they purchased the property that it was not going to be their ‘forever home’ but went ahead just to get their foot in the door of the property market,” Mr Lees said.

The couple purchased an affordable townhouse, with plans to eventually buy a home with a bigger backyard down the track before they start a family.

“If they had been boomers, they may have been able to afford a larger home as their first purchase and stayed longer.”

“While there are a lot of first-home buyers similar to Lachie and Bec who just want to get their ‘foot in the door’ of the property market, there is also a small cohort of first-home buyers in our area, on good incomes and with a large deposit, who have purchased a home that is big enough for them to raise a family,” Mr Lees said.

He explained that affordability is the main driver for most first-home buyers.

“A lot of first home buyers simply can’t afford to buy a large family home or are dissuaded by the high loan repayments that will impact their current lifestyle.

“Like Lachie and Bec, buying what they can afford now has given them a head start, then once they are ready to start a family, they plan to sell and upgrade to a family-sized home,” he said.

Buyers’ circling

Economic analyst Megan Lieu notes that buyers are circling the market on the back of the lowest lending rates in two years.

A succession of rate rises throughout 2022 and 2023 and nine consecutive holds from late 2023 to late 2024 led to the Reserve Bank this year introducing three rate cuts so far, bringing the cash rate down from 4.35% in January to 3.6% in August.

This has had a big impact on the market, primarily by increasing borrowing capacities, lowering repayments and improving the affordability of homes, Ms Lieu explains.

“In the coming months, the full effect of the rate cuts is likely to become more evident. We expect the number of loans to both owner-occupiers and investors to continue increasing, potentially by a larger margin.”

Ms Lieu adds that the number of refinanced loans is also anticipated to rise as more institutions decrease interest rates to remain competitive.

“Lower interest rates will continue to stimulate demand in the market and add to the current price growth momentum.

“While the pace of growth may increase if further rate cuts materialise in the remainder of the year, housing affordability will still be at historically low levels. This may temper growth, despite the more positive borrowing conditions,” Ms Lieu said.

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