Smashed avocados not to blame for housing crisis

The myth that avocados are responsible for the housing crisis has been smashed.

Cutting spending isn't making it any easier for prospective home owners to break into the property market, a study has found.

Rising inflation and house prices mean deposits are largely unobtainable for young people with moderate incomes and election promises would only making the situation worse.

The research led by University of Sydney's Laurence Troy, found only 40 per cent of 25 to 34-year-olds in Sydney own their own home, compared to more than 62 per cent of Gen X and 66 per cent of Baby Boomers.

While many young adults would be able to afford mortgage repayments, the high cost of living makes it virtually impossible for them to save a deposit while also paying rent.

Three-in-four renters surveyed across Sydney and Perth had less than $5000 in savings, well short of the $220,000 required for a 20 per cent deposit on an average Sydney dwelling.

Dr Troy says they are unable to keep up with the rapid increases in housing prices, despite minimising spending on dining out and holidays.

Many young people even reported relying on two-minute noodles to cut food costs.

"Instead, young adults are focused on paying re-occurring items such as food, petrol and debts, with the biggest challenges being the large, irregular, and often unexpected, expenditures such as car repairs and professional insurances," he said.

Almost half of respondents said they expected help from "the bank of mum and dad" to buy a home, underscoring the widening gap between those born into wealth and those without. 

For those in Sydney who had managed to buy a home, family support was essential.

With the NSW election less than a week away, there is little being promised that will help fix the situation.

Dr Troy said both Labor and the coalition were focusing on providing short-term subsidies on housing deposits, which only further inflated demand for houses and drove prices even higher.

Instead, governments should address structural inequality in the housing market by winding back tax concessions like negative gearing that benefits investors over prospective home-owners.

The savings could then be redirected to increase the supply of social and affordable housing, Dr Troy said.

Economist Peter Tulip said the coalition's signature future fund policy, in which the government would match parents' contributions to an investment account, would not improve overall housing affordability because it didn't address housing supply.

"It just means that children with wealthy parents will be able to further outbid other home buyers," the former Reserve Bank researcher said.

"Home ownership is already becoming hereditary. This policy makes that worse."