Home ownership plummets for under 40s and newbies
Australian home ownership rates are plunging, especially for the younger half of the population. Ownership rates have fallen by more than a third since 2001 for those aged under 40. In 2002, 36% of those aged under 39 owned a home. By 2014, that had fallen to just 25%. The latest survey in the HILDA (Household Income and Labour Dynamics) series produced by Melbourne University shows that the problem is impacting all economic and education ‘classes’, but inevitably, the impact is greatest on those most vulnerable in the economy.
The chart below, produced by the Australian Financial Review from HILDA data, shows home ownership changes from 2002 to 2014, for males, by major occupations.
While home ownership has declined for all occupations, it has collapsed for those in less financially rewarding and more precarious employment. The better educated a young male is, the more likely they are to own their own home.
This is sobering data, because it suggests that the recent expansion in supply of dwellings (the housing boom as we more colloquially know it), has not translated into anything like an equitable distribution of ownership across the population. There may be more housing, - and it could even be approaching supply parity - but that has not helped home ownership levels.
That is a worry, because a key indicator of financial security in later life has for a long time been the ownership of one’s own house. With people living longer, their reliance on this core personal asset is even more accentuated, but also it seems, even less attainable. The implication of housing insecurity in later life is far reaching, including more people being reliant, for longer than ever before, on support from Government in the form of pensions and housing assistance.
The director of the HILDA survey, Melbourne University economics professor Roger Wilkins slates the dilemma home directly to the rapid and unrestrained growth in prices of residential dwellings. He described the situation to the AFR’s Ben Potter as a ‘budget worry’.
The more regularly commented upon dimension of this situation and debate is the challenge faced by first-time home buyers – or at least potential home buyers – whose capacity to enter the market is at or near an all time low. Writing in The Guardian on 10th August, 2017, Greg Jericho commented that first-home buyers in Sydney are going to have to wait for affordability to improve before they have any real chance of joining the ranks of the mortgaged.
Pointing to the chart below, Jericho suggests there may be some market price cooling to commence around the end of 2017, because of the downturn in growth in housing finance.
Professor Wilkins’ suggestion is that to properly cool the market incentives to investors need to be curtailed, to cool price growth and create an environment in which more people can enter the home ownership market. He said:
"I don't think there is an appreciation or an explicit recognition of the laws of maths. If you want more home owners you are going to have to have fewer rental properties."
The HILDA survey points to the other challenge in home ownership – prices growing much faster than incomes. The chart below shows median household income by region from 2001 to 2015. As the headline says and as Greg Jericho alludes, those in Sydney – where dwelling prices have grown the fastest – have experienced the lowest median wages growth.
There should be no surprise, given the above, that Sydney’s first-home buyers get the smallest national share of new mortgages. But the difference between 2012 and 2017 data might be a little more surprising, as the chart below shows.
What all this points to is that unless house prices are brought under control – possibly by removing the incentives to investors – and/or incomes rise and possibly quite sharply, Australia’s home ownership problem will become a long-term economic problem that we may no longer have the capacity to address.
If that eventuated, the new housing market would, in future, presumably be dominated by smaller, lower-quality dwellings. We are guessing, but most of those would be tall buildings and on trend, made from concrete and steel. A sobering thought!
For access to the HILDA report go to