Billy Smith is standing in an empty room, in a house full of empty rooms, in one of Melbourne's daggier suburbs. "All mine," he says with satisfaction. The purchase of a veritable vacuum ("Less than 200 grand," Smith gloats) may not be everyone's idea of a major investment triumph, but the 27-year-old is buzzing. To get here he sold almost everything, hence the gaping rooms. His car, his stereo, his television, his leather sofa, his futon, his mountain bike, his CDs and his beloved leather jacket. For 12 months he worked weekends in a call centre as well as days as a high-school teacher. "I was never going to get a deposit together on a teacher's salary," he says, "so I decided to really push myself. It took me two years, but I got here. You just need the right attitude. You need to look at saving as a challenge, a physical challenge. Like an extreme sport."

It's not such a strange analogy, particularly in a sport-obsessed nation. People across Australia (especially in Melbourne and Sydney) are selling their precious possessions, working nights in supermarkets on top of a day job in accounting, and sacrificing good wine, good food and good clothes. Sometimes they're sacrificing their relationships with parents, friends and partners.

Over the past five years, saving money and accumulating capital has indeed evolved into an extreme sport. Sometimes a dangerous one, because property has never cost more and thus been more difficult to achieve. And it's all in pursuit of that other national obsession - owning your own home.

"If someone had asked me a couple of years ago if I could live with my parents again, I would have said no way," says Sydneysider Lisa Milner. The 29-year-old ad exec is a picture of corporate success: bright, well travelled, well spoken and well dressed. She loves her work, has an active social life and, like an increasing number of her peers, she lives with her mum and dad, in suburban Ryde. For good reason.

"If I meet someone in a bar and tell them I live with my parents, they do tend to look at me a bit strangely," Milner laughs. "But some people are good about it, and a lot of people think it's a really smart thing to do."

After working for five years in London, Milner, a self-confessed "spender", came home with almost nothing in the bank. "I'd realised just how hard it is to save," she says. "But I'd also decided I wanted to stand on my own two feet and get some assets behind me. So I decided to stay with my parents." It's a strange conjunction - moving back with the folks so you can stand on your own two feet and eventually buy your own place - but it's becoming more common. It's working well for Milner. After living overseas, there's a pleasant novelty in having family around.

In Melbourne's inner-west, Claudia and John Pezzimenti, both in their late 20s, are enjoying living with Claudia's parents so much that they're still there despite having bought their home 12 months ago. Sitting around the kitchen table, with nieces and nephews (just visiting) running riot while Mum makes coffee and hands around homemade almond pastries, it seems positively idyllic. "We thought, why not rent the place out for a year or so, get the mortgage down as much as possible?" Claudia says. That Claudia is expecting a baby was also a consideration. "It'll be great having Mum's help with the bambino," she says, patting her tummy. "We're in no rush to go."

"It's bearable," says Ken Carter, somewhat more cautiously. The 32-year-old salesman moved back to his parents' home in Melbourne's Balwyn last year to save for a house. "I'd always assumed I'd buy my own place, but I got to about my 30th birthday and realised I was just not going to do it unless I did something radical. It took a couple of years to decide just how far I was prepared to go. But there's something about having your own home. You just have to do it. You need to know you've always got that security."

And it's always been this way. Australia has the highest rate of home ownership in the Western world. At first, it was our desperation to "civilise" this strange new nation. Then the depressions of the 1890s and 1930s gave this search for security a sharper focus. These days the combined forces of a world in flux, an unstable job market and the prospect of a lengthy self-funded retirement have only sharpened our desire.

Successive governments have fostered that desire too, but ironically it's in part due to the First Home Owner Grant that so many would-be first homebuyers are being forced out of the market. Ten years ago you needed to save about half a year's salary to buy a house in Sydney or Melbourne (that's a 10 per cent deposit on an average house price at the average weekly wage). But as more and more people stampeded into the market in a mix of fear, greed, free money and outright panic, house prices went up. And up. And up. Way out of kilter with wages. By 2002 you needed 75 per cent of a year's income for the deposit on a place in Melbourne and 94 per cent for a home in Sydney.

So someone like Lisa Milner pays her parents board and banks three-quarters of her significant salary (she's in advertising, remember). By doing this for two years, she hopes to scrape together enough for a deposit on a flat in inner Sydney.

But returning to the ancestral home can be fraught - even disastrous. One Melbourne couple destroyed their relationship with his parents, very nearly wrecked their own relationship and still didn't save nearly enough for a deposit.

A 33-year-old photo editor survived living with his girlfriend's parents for more than two years, but the stress it put on the relationship was ultimately fatal. "Her parents were great," he says, "but we were living a long way out of town for the first time in our lives, and I think the pressure that put on us was a big part of the problem." The couple bought a flat in Sydney's Surry Hills but broke up soon afterwards. Was it all worth it? "Well, I still have the house," he says, "but I'd rather have the girl."

"I know a lot of people who've moved back with their parents, for a variety of reasons. I would suggest other things ahead of it," says Peter Cerexhe, who has just written Get That Home Deposit (Allen & Unwin, $19.95). In it he outlines a range of measures, from the mild to the extreme, to scrape together the necessary funds in just 104 weeks. "I met two young men who both worked in the same factory," he says. "They rented a one-bedroom flat and adjusted their shifts and took it in turns to sleep in the same bed. Within a couple of years they both bought their own homes. I also know more than one person who worked hard to get retrenched. It was the only time in their lives they'd have a lump sum in their hands, and they used it to enter the property market."

In many ethnic communities it's not unusual to go around broader communities, as well as the family, seeking cash donations. "But it's not really a gift," says one young Sri Lankan, who has just bought a home in Sydney's outer west with his wife. "It's about putting the money where it's most needed. The money goes around the community. When it's someone else's turn, then we'll give."

"There are so many different ways people are getting there," says Cerexhe. Sharing with friends who are also saving - and similarly motivated - can also work well.

But sometimes even with a savings plan, a second job or a cash donation, people still can't afford a deposit on the house they want. "You see a lot of people buying properties in partnership with other family members," says Greg Golfin of Raine & Horne in the Sydney suburb of Annandale. "The other day I had four guys come in who wanted to buy a house together. A couple of years ago you just didn't see that."

One group of university friends - two singles and a couple - pooled together to buy a terrace in Sydney, which they shared. When they had accumulated a bit of equity, they bought a second place and rented it out. A year later they bought a third property, then all went their separate ways, each into their own home. It was a tip they picked up from their parents, immigrants in the 1950s. And it's a tactic enjoying a resurgence. Many singles, especially in Melbourne and Sydney, share equity in their first home with their parents. Sometimes they buy and share with a sibling, cousin or friends. Like living with the folks (or going into business with your partner), it can work brilliantly. Or it can be a disaster.

"We'd shared a house for years," says one Melbourne professional who bought with a couple. "But when their relationship broke down, all hell broke loose. You have to sort out who buys out who, who stays and who goes. And even if you get that sorted, you still have to find the finance to do it."

But is the nameless generation that has succeeded gen X turning its back on the Australian dream? Certainly there are plenty of people making different choices about where they put their money. Between 1988 and 1998 home ownership for the under-35s fell from 70.4 per cent to 62 per cent.

Jessica Frid, a down-to-earth 25-year-old who works in events management, started putting money aside pretty much as soon as she got a job. Last year she and her partner decided to put their money into some assets, and naturally the first thing they did was look at property. "But there are so many different opinions out there - it's going up, it's going down, the market's going soft, you have to invest in property," she says. "I just didn't hear an opinion I felt I could trust. So I decided to put my money somewhere else." Specifically, art.

Frid has a life-long passion for art and is reasonably knowledgeable in the field. "The other issue is, I want to live a certain way, and I can't afford that now in terms of property," she says. "So longer term I do want the dream home, with beautiful art on the walls. But at the moment I can't afford the walls. So I'm starting with the art."

Others are profoundly unmoved by the idea of a mortgage. "I don't own a home and I'm not really interested in owning one," says 39-year-old Andrew Hawkins from Sydney. Like Frid, his relaxed manner and no-nonsense attitude belie the myth of flighty young things refusing to save for a rainy day. "I, and a lot of the people I know, just don't place as much value on bricks and mortar," Hawkins says. "It doesn't interest us. And it's not just about being tied to a physical location." A more important issue is work. "We don't want to be stuck in the same job for the next 20 years just so we can meet our mortgage repayments."

Rather than spend his savings on a house, Hawkins is putting the same sum into a boat. "Not a big luxury thing, but something big enough to sail around Australia in. And a good second-hand 30-footer will hold its value really well. It may not appreciate, but you won't lose money on it either."

Art, boats - it sounds rather glamorous, and almost sensible. But there's a darker side to the declining rate of home ownership. In a major study released last year, NATSEM (the National Centre for Social and Economic Modelling) found that not only is home ownership among the young declining, but that, overall, the greatest single way that Australians accumulate assets (ergo financial security) is through property. So if you can afford to travel and buy boats and art and a plasma TV and still put money in the bank or the stockmarket or superannuation, terrific. But the truth is that a great many people are not buying property and not saving in a significant way, simply because they can't afford to.

"Research is indicating a lot of people between 20 and 35 do see it as an impossible dream and have given up on it," says Terry Burke, professor of housing studies at Swinburne University. Some are spending their discretionary income on travel and cars. Some are thinking outside the square. They're also deferring marriage and children, often a strong impetus for buying a home.

"But there are also many more young people on low incomes," Burke says. "In the mid-1970s, 20- to 34-year-olds made up 27.9 per cent of low-income earners. By the late 1990s, they were 43.7 per cent of low-income earners. So that makes a difference."

"I just try not to think about it," says one builder's labourer in his early 30s. "I save what I can, when I can, but it's not looking like a luxurious retirement. And it's the same for most of my mates. Part of you thinks it'll be OK, it'll work out somehow. You just keep on working, hope you don't do your back. Hope for the best."

"It's hopeless," says Vicki Lewis, gripping her coffee cup. Lewis looks like someone straight out of a mortgage advertisement, and theoretically she's a middle-class Melbourne success story: a post-graduate education, a lively manner and a lot of style. But in reality, "I'm single, I'm a woman, I'm staring 40 in the face, and although I work full-time, it's sessional - that's academic-speak for casual. I spoke to a few banks about what I needed for a mortgage, but no one was prepared to lend me 90 or even 80 per cent of the principal." They advised her, variously, to get a real job, get a man, or find a very, very large lump sum from somewhere. "The rules seem to change if you have a lot of money already, and they don't seem to care where it comes from. But I'm never going to have access to 50 or 100 grand. So where does that leave me?"

Lewis is not alone, as the burgeoning mortgage-broker market proves. Huge demographic shifts (from higher divorce rates to an increased part-time workforce) mean hundreds of thousands of Australians don't fit the two-full-time-incomes mould. Banks like customers with secure jobs, and with a "proven savings history". Mortgage brokers find loans for people with neither.

But if you can pull more than 20 per cent of the principal out of a hat, a savings history becomes incidental. Mortgage Choice says the most common way their clients find the deposit is through a gift from their parents (although one man won $25,000 on a scratchy). But if you don't have wealthy parents (or a streak of unbelievable luck) and if you don't have permanent employment, you're unlikely to get past the starting post.

And even if you do chance upon that lucky scratchy, there are other considerations. "Young couples are borrowing $300,000 to $400,000 on next to no deposit, which is pretty scary," says John Symond of Aussie Home Loans. "They have no buffer zone. If one single thing happens - they start a family, one partner loses their job, someone's salary decreases, interest rates rise, property values fall - they're stuffed. And there's a very good chance that at least one of those things will happen within the first year or so of them buying."

Getting your foot in the door of the housing market is certainly a daunting ask, but author Peter Cerexhe insists it's a lot like dieting. People gripe about it, but it can be done. What you need to do is set realistic goals. And stay motivated.

Sarah Rogers, 29, has always wanted to own her own home. From the time she started working, she started saving, and when she had a decent sum in the bank she began looking at properties. What Rogers did, unwittingly, was use many of Cerexhe's tips to get the deposit together. Every time she got a pay rise, she put the difference straight into the bank. When the company she worked for split off from a larger organisation and her entitlements were paid out, that also went into savings. She tapped into the First Home Owner Grant. And when she started seriously looking at properties, she opened negotiations with her parents.

"When I first said I was thinking of buying a place, they offered to put something towards the deposit," she says. "We also discussed them having some equity in the actual property. But I decided I'd rather borrow part of the principal from them and spread the risk." She pays them interest only, but a good rate of interest, and throws the occasional lump sum at the capital. "I just hated the idea of owing all that money to the bank," she says. "This way I don't feel quite so exposed." Rogers moved into her new pad, in Melbourne's inner-north, just after Christmas. She also bought a dog, something not always possible when renting. It was a huge start to her 30th year.

"I'm loving having the place," Rogers says. "It feels very settled. It's also a bit weighty - it's a lot of responsibility. If I hadn't bought the house, I would have quit my job and gone backpacking for six months. But I'm very happy with the choice I've made."

10 steps to mortgaged bliss

1. Set a time limit Cerexhe suggests 104 weeks - two years. It's long enough to achieve something, short enough to be bearable.
2. Write it down Get That Home Deposit (Allen & Unwin, $19.95) is centred on a worksheet on which you document what you're going to do, and how.
3. Put the money aside Ever tried to save money by making your own lunch? Switch that $25 into a separate bank account - every week.
4. Leave room for error You'll fall off the wagon from time to time. Factor this into your savings plan.
5. Sell something you love Car, cameras, mountain bike - you can always replace them.
6. Get a second job For most people, especially singles, just saving and selling stuff won't get you there.
7. Moderate bad habits Don't try and revolutionise your life. Instead, slightly reduce the amount you spend each week on guilty pleasures.
8. Moderate the sacrifices PIck six "indulgences" and do without them - but just for six months each.
9. Investigate government entitlements Check out the First Home Owner Grant and savings on stamp duty.
10. Look at the big picture Make sure your savings plan isn't so radical it puts unbearable pressure on your relationships. No house is worth losing those you love.

Dangerous obsession

Accept an "early settlement discount"
This is a euphemistic name for misrepresenting the price of a property, and involves collusion between the buyer and seller against the lender - and the Australian Taxation Office. Say a property is worth $100,000. The contract of sale says you're buying it for $100,000, subject to "Clause D" (or whatever). Clause D - not part of the formal contract - says you get a $20,000 discount if you settle early. It lets you borrow 100 per cent of the purchase price ($80,000) because the bank thinks it's lending you 80 per cent. The vendor agrees to save on capital gains or, in the case of new developments, to inflate the price of similar properties. It might seem like a cool way to buy a house without a deposit. It is illegal. Don't do it.

Get sucked in by "two-tier marketing"
This is where promotional companies, not registered real estate agents, rush you into "bargain" property deals - including providing lightning-speed finance and "paralegal" advice - at way over market value. The scamsters typically target people who have no idea of actual property values and could easily believe that an $80,000 Gold Coast apartment, for example, was worth $120,000. Tougher laws are now in place in Queensland to combat these rip-offs, but people are still getting burnt. Don't let this be you.

Believe property values always increase
This is especially important if you fall for a buy-off-the-plan-and-sell-before-you-settle deal. A favourite of get-rich-quick advisers, you buy a yet-to-be-built apartment at a modest deposit. Nothing wrong with this if you plan to buy the joint. But it's sometimes recommended as a way to make money fast - you "buy" off the plan but pay nothing, then you sell a year later when the property has increased in value. But if the property doesn't go up in value? Or decreases in value? Or you can't sell at all? You're left with a massive financial commitment, and no way to pay. Don't do it.

Exploit other people
The same get-rich-quick advisers may also recommend you seek out people whose loved ones have died, marriages fallen apart, have lost their jobs or - ideally - all three. These people can be harassed into selling below market value, apparently. Don't do it.

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