EP. 1431 THE BANK OF MUM & DAD IS BOOMING - $150 BILLION CHANGES HANDS EVERY YEAR!

The largest intergenerational wealth transfer in Australian history is quietly transforming our property landscape. A staggering $3.5 trillion will pass from baby boomers to younger generations by 2050, with 70% of this wealth tied up in real estate. This isn't some distant future scenario—over $150 billion is already changing hands annually, reshaping housing opportunities for thousands of Australians.

Most surprisingly, the "Bank of Mum and Dad" has emerged as Australia's ninth-largest lender, pumping more than $35 billion yearly into the property market through loans, gifts, and guarantees. While the average inheritance sits at $125,000, those in blue-chip suburbs often receive $500,000 or more. This financial boost has become essential for younger buyers, with 60-70% of first-home purchasers now receiving some form of parental assistance—a dramatic shift from previous generations.

Parental support extends beyond direct cash transfers. Many families use equity in their existing homes as guarantees, typically lasting just 2-3 years until property values rise or mortgages are paid down. This approach allows parents to help without immediately transferring large sums. We're also seeing more multi-generational households forming as families combine resources to secure larger properties accommodating extended family members. However, this assistance often comes with complexity, as parents supporting one child frequently feel obligated to help all children equally.

This wealth shift raises important questions about housing access and equity in Australia. For those with access to the "Bank of Mum and Dad," the path to homeownership becomes significantly smoother. For others, the challenge intensifies. Whether you're planning to help your children, hoping to receive assistance, or navigating the market independently, understanding this massive wealth transition is crucial for making informed property decisions in today's evolving landscape. Have you discussed inheritance planning with your family?

Episode Transcript

Speaker 1 (00:01):
people always talk about getting a start, and
something that's slowly rumblingunderneath is the bank of mum
and dad.
There's a massive amount ofwealth transition currently
happening and particularlytowards 2050.
We're going to talk about thebig numbers in the bank of mum
and dad stay tuned.

Speaker 2 (00:39):
Good morning, how are you?
I'm good.
I'm actually a little bitshocked this morning.
We're probably talking aboutthe biggest intergenerational
wealth transfer ever to exist.

Speaker 1 (00:57):
It's shocking In the history of Australians.

Speaker 2 (01:02):
Yeah, I would say just in the history of yeah in
in australia and and it's allproperty, sort of property
focused.
Um, we're talking about 3.5trillion dollars expected to be
transferred from baby boomers toyounger generations in
australia by 2050.

Speaker 1 (01:24):
3.5 sounds like a long way away.
But what's that?
25 years, that's pretty muchtwo generations.
Wow, yeah, Wow.

Speaker 2 (01:35):
Yeah, that's big numbers.
Correct me if.

Speaker 1 (01:39):
I'm wrong.

Speaker 2 (01:41):
Just start spending it now kids, it'll be fine,
everything's going to be allright, but correct me if I'm
wrong that is comparable toeither the stock market or
australian super, which one ofthe two stock market amazing,
you know, when you think of thatvolume of money is quite

(02:02):
astonishing.
Um, currently over 150 billiondollars is changing hands every
year and that number is expectedto grow.
So you know it does.
It does raise questions.
How does this impact the market?
Um, and where is it happening?
Um, the average australAustralian inheritance is

(02:22):
$125,000, but that's the average.
You take that to blue-chipsuburbs and we're fortunate to
live amongst some of the mostexpensive real estate in the
world, on the lower North Shoreand the eastern suburbs.
Some of those inheritances are$500,000 or more.

Speaker 1 (02:43):
Yeah, it's big.
Hey, I would have thought itwould have been.
You know that, 125 I thoughtsounded about right, and I guess
a 500, I thought was a bit low,but I guess it's going between
normally two or three kids.
So when you chop it up, youknow, a kid's house worth a
couple of mil.
Chop it between three kids andsomeone else you love.

(03:05):
Bang, bang, boom.

Speaker 2 (03:08):
And from the stats we've been looking at this
morning, 70% of that inheritanceis tied up in property.
So it does mean homes are theprimary asset you know that are
being inherited to help youngergenerations enter the market.
70% of that wealth.

Speaker 1 (03:26):
Yeah.
So what does that?
What does that mean?

Speaker 2 (03:34):
The thank of mum and dad is booming.
That's where the headline camefrom this morning.

Speaker 1 (03:39):
Yeah, don't go to work today, just chukka-sikki,
relax.
There's more cash, mullah,coming your way from mum and dad
.
Kids, just take a chill pill,darling.
Take a book, a book in aholiday today.

Speaker 2 (03:53):
Do you wanna do you to know a really good fact?
This is probably my favouriteone so far.
Yeah, the bank of mum and dadare now Australia's ninth
biggest lender, contributingmore than $35 billion annually
in loans, gifts and guarantees.
How good is that?

(04:17):
how much, thirty five billiondollars annually Australia's
ninth biggest lender is thebanker, mum and dad yeah, that's
astonishing and you know itdoesn't come as a surprise that
60 to 70 percent of first-timebuyers um are now receiving some

(04:39):
form of financial assistancefrom their parents and I'm not
always talking about how much isthat?
well, 60 to 60 to 70 percent offirst-time buyers are now
assisting.
You know getting some kind ofassistance.
First-time buyers are nowassisting.
You know getting some kind ofassistance.
No, yeah, yeah, it doesn'tsurprise me, but guarantees are
a big thing.

(04:59):
Of this as well, you know a bigpart.
They're not necessarily puttingthe cash down, but you know the
loans being guaranteed againstthe family house, yeah, so so
that's it.

Speaker 1 (05:11):
I never realized that it was such a big number of
moms and dads are reallychipping in for these kids, like
very different to generationsbefore.

Speaker 2 (05:21):
Yeah, you know six or seven out of 10 when, when you
look at it like that, familieswould be that is gold.

Speaker 1 (05:32):
That is gold.
So so, um, so, mum and dad.
So how do we get into mums anddad's pockets?
Let's give some.
Let's give these.
Let's give some people sometips.
I think you've given away agood one.
The, the guarantee, theguarantor of, of of loans is, is
is a really nice path yeah.

Speaker 2 (05:52):
So loans, gifts or guarantees is is one way or
another that assistance can bepassed down.
I think it's a nice thing to doit as well, you know, if you've
got the backing of your mum anddad through your first property
purchase, um, it went.
It went a really long way forme and it actually it was
nothing to do with the dollarsor cents because there was no

(06:13):
money passed through on thepurchase, but the emotional
support is a big thing.
But you can assist kids, orkids can ask for the assistance
without asking for money, whereeither it's like a
non-refundable gift yeah, voteof confidence.
Um, non-refundable confidenceyeah, voter confidence.

(06:37):
Or, um, as I said, using thefamily home as a guarantee
against your loan and that comesoff once either your property
value has gone up 20 or yourmortgage has been paid down 20,
or both of those things havehappened at the same time, so
it's not a forever thing.

Speaker 1 (06:54):
Yes, that's interesting.
So, um, so there's a lot ofcash out there and high level
numbers.
I know I always rattle aroundon these numbers, guys, but
there's 11 trillion in propertyand there, um, you know, across
australia strata and I reckonthat's that's.
That's pretty low leverage.

(07:18):
That's pretty low leverage.
A lot of houses paid off, a lotof mum and dad's okay, but hey,
how do those mums and dads feelthey?
You know, they get the kidspast 18, think it's time for
themselves, time to enjoy, timeto relax a little bit, and then
they get sucked right back inwith helping the kids.

Speaker 2 (07:38):
Yeah, it's funny.
I do talk to some families thatare going around helping the
kids with first home buyers andthey say we can't extend
ourselves any further becausewe've got three kids and
whatever we do for the firstmeans we need to do for the
other two.

Speaker 1 (07:55):
Good point?
I think there's, yes, buthaving the treating everybody
equally is another thing that wedo see, with people helping
their kids out.
That's for sure.
That's for sure.
So there's a show guys andgirls, inheritance is a really,

(08:16):
really interesting one.
It's real, it's factual.
We live in a very lucky countrywhere people get to do this,
but we treat it so seriously thewhole how, the whole buying a
home thing.
But you can see how that'spropagated itself, like people
that were talking aroundbarbecues in the 70s, 80s and

(08:38):
90s, and you know, we do take,take property seriously, and now
they're sort of quite quitecomfortable yeah, that's right,
and this is only going to getyou know this bigger picture
we're talking about this morning.

Speaker 2 (08:52):
Um, this is only going to get bigger.
You know 150 billion dollarschanging hands every year, but
by 2050, you know it's going tobe even more.
So watch this space yeah, wow,all right.

Speaker 1 (09:09):
So, kids, um, go knock up mum and dad tonight,
take him to dinner and um andask them for a stack of money,
because that's what everyone'sdoing and you know, that's
that's what you saw in novak.
Novak morning minutes look.

Speaker 2 (09:23):
I hope this helped Even just bring things to light
for you.

Speaker 1 (09:29):
Yeah, and before we go I just want to go back on
something you mentioned, billy.
Mum and dad will often feelthat if they're helping their
kid to buy something for 700grand, that they're in the hole
for 700.
Mum and dad are in the hole asmuch as their child, but I liked
what you said.

(09:49):
If mum and dads are helping thekids, it's really that first
20% that the bank are interestedin, that later 80% the bank
will look after.
So, mum and dad, if you'rebuying something for 700 grand
with your kids, and well,they're buying it and you're
helping them, there's 20% ofthat is 140 grand.

(10:12):
That's really where that'sbecause it's.
But then again they're gettingaround that now with LMI and
stuff like that, with not payingany lenders, mortgage insurance
and all that stuff that'scoming through.
So, but normally, yes, I guessif they're past that first home
buyer thing, that 20 is 140grand.
Um, as soon as you've got thatin equity in that property, um,

(10:37):
you can leave the kids on theirown.
So it's probably more like whenthey're buying a two-bedroom
unit or when they're buying ahouse that that 20 becomes a
little bit more apparent, a bitmore real yeah, that's right and
and we are like we are findinga lot of property transaction.

Speaker 2 (10:56):
It is multi-generational now the grant
, you know the parents aremoving in with the kids and
therefore the home needs to bebigger and it needs to
accommodate more than just afamily of four.
Um, there are, there aretransactions happening like that
, but for the first home buyerstuff, the entry level, yeah,
you'd be surprised.
The guarantee is normally inplace for two to three years and

(11:16):
that's a combination of themarket going up and the mortgage
being paid off and quitequickly it disappears billy
drury, the old man um stuck in ayoung man's body.

Speaker 1 (11:25):
Thank you very much have a lovely day.

Speaker 2 (11:28):
Thank you for your time.
Take care bye.