Home ownership falls fastest among young, poor

Home ownership has declined more among younger and poorer people than across the population as a whole, an inquiry into housing affordability and supply heard.

While Australia’s overall home ownership rate has fallen from about 70 per cent to 66 per cent over the past 20 years, the decline in younger and lower-income was more severe, Australian Bureau of Statistics head of household surveys David Zago said.

“In the middle-income quintile, ownership has dropped from 73 per cent to 65 per cent, and in the second-lowest quintile it’s actually dropped from 68 per cent to 61 per cent,” Mr Zago said.

“For those aged 35-44, it’s decreased from 73 per cent to 61 per cent, and for those aged 25-34, it’s actually decreased from 52 per cent to 37 per cent.”

Home ownership has been declining for years, despite falling borrowing costs that have made servicing loans easier, because higher prices mean higher deposits that are beyond the reach of a growing number of people.

The ABS’s Survey of Income and Housing shows that total home ownership fell from 71.4 per cent of households in 1995 to 66.2 per cent in 2018.

But the figures that Mr Zago cited at the inquiry were based on the ABS’ Survey of Income and Housing. They clearly show the way the country’s super-charged dwelling prices are worsening inequality.

That matters, not just because of the “stark” social justice implications of unaffordable housing, but also on the brake they put on a city’s development, Committee for Sydney chief executive Gabriel Metcalf said last week.

In Monday’s public hearing, Labour MP Matt Thistlethwaite asked if “the system” was designed to push prices higher, as a result of tax settings that encouraged people to put money into housing as an asset class.

Nathan Dal Bon, chief executive of the federal government’s National Housing Finance and Investment Corporation, replied that there were a range of reasons for high prices, but Australia as a country had not set out what role, in a policy sense, it wanted housing to play.

“I think the stumbling point has been, ‘what are the key objectives that we want to have with housing?’ Mr Dal Bon said. “Whether it’s renting or whether it’s purchase, and working backwards from there in terms of what we think should be appropriate in delivering on those objectives.”

Renée Roberts, APRA’s executive director for policy and advice, said the agency’s increase last month of 50 basis points to the 2.5 percentage point buffer over which lenders are required to assess an applicant’s ability to repay their loans was likely to have reduced maximum borrowing capacity by 5 per cent.

“We expect that that reduces the maximum borrowing capacity of someone who is at the limit by approximately 5 per cent,” Ms Roberts told the inquiry.

“We see that the impact will be larger for investors than owner occupiers because investors tend to move more highly leveraged … but it does impact all borrowers, particularly if you are at that margin.”

Other home ownership data showed that over the past 20-plus years the proportion of people owning their dwelling outright had decreased.

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