How much could you save moving back in with Mum and Dad?

February 15, 2023

Living with family for a few extra years can significantly accelerate a person's ability to save for a home deposit, especially given the increasing cost of living and reduced borrowing power.

 

An article recently published in the Sydney Morning Herald revealed that the average renter could save approximately $25,000 per year by living rent-free with their family instead of flat sharing, and up to around $137,800 if they stayed there for five years.

The calculations are based on saving $289 per week on rent, which is half of the $577 paid for the median-priced capital city rental, as well as $190 on other expenses. These savings are then assumed to be put in a savings account with a 3.05% interest rate.

An average Millennial or Generation Z saver, with savings of about $17,900 and an additional monthly savings of $872, could accumulate more than $216,000 over five years. Those renting in more expensive suburbs or cities or on their own could see even greater savings by returning to the family home.

In contrast, a renter saving at the same rate would take about 15 years to reach a similar amount.

It comes as Nine/Domain report on the amount now needed to reach a 20% house deposit.

The article says, Australians seeking to save for a house deposit now require tens of thousands of dollars more than they did just three years ago, despite falling property prices in the current market downturn.

During the pandemic property boom, which witnessed surging house prices in Sydney and Melbourne, the savings needed for a 20% deposit increased significantly and remain higher than 2019 levels. As a result, more and more buyers are requesting assistance from "the bank of mum and dad",

20pc deposit required
Cubitts

With the cost of a Granny Flat around $200-250,000 the value they could represent to this market should not be underestimated. Managing Director of Cubitt’s Granny Flats and Home Extensions, Kate Cubitt says “we’re seeing clients come to us, asking for costs and feasibility studies, with the idea that having a granny flat on the property can be a way to offset the impact of rising interest rates”.

Kate says, “Gen Z is looking at house prices, looking at mortgages, and parents in a position to do so are suggesting they come home. Building a Granny Flat in mum’s backyard is a flexible addition to family lifestyle that gets young adults off the rental rate race now – but also provides options for owner later in life – renting one of the homes out for income, or even retiring”

With CoreLogic data in 2019 suggesting that the addition of a Granny Flat could add as much at 30% to home value, there’s more than one way a Granny Flat is helping to offset the impact of rising interest rates.

Families who are worried that interest rate rises will continue to rise, and stay there for some time will be looking at the resource they have available to maintain their lifestyle. Kate finishes on a key point – “A Granny Flat is about having options. Doing the cost and feasibility is about having options. No one is rushing into decisions until they have done research, but families are coming to us to imagine the possibilities, and help them lay out a plan

 

Cubitt’s offer a completely free feasibility study and quote based on detailed onsite assessments. They operate across the East coast of NSW from Taree to Moruya, west into the highlands and Blue Mountains and cover all of the ACT. Visit a showroom or call 1300 721 150.

Free On-Site Assessment at Your Property

Interested in finding out how to make a positive investment from a Cubitt's Granny Flat or Home Extension? Get in touch for a no-obligation site inspection today.

If you are looking to purchase a new property and want to do a Granny Flat Suitability Check - please use this form instead.

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About Kate Cubitt

Kate is Managing Director of Cubitt's. She is an experienced company director, avid investor and keen to share the financial insight she's gained being a female leader in the building industry.