The Household, Income and Labour Dynamics in Australia Report (HILDA), a national snapshot released annually, has been running since 2001. Researchers interview the same 17,000 Australians each year, to create a snapshot of the nation. The report spans every topic of household life, including income, savings, employment, family life, and health.

The report found that between 2001 and 2014 owner-occupied houses have declined by 3.5 percentage points from 63.8% in 2001 to 59.7% in 2014.

Rates of home ownership have declined in all parts of Australia, but the extent of the decline varies. The decline was greatest in Victoria (7.8 percentage-points), followed by New South Wales (4.3 percentage points) and South Australia (2.5 percentage points). There was little change in Queensland and Western Australia. Tasmania, the Australian Capital Territory and the Northern Territory were excluded in the measurement due to small sample sizes.

Not unexpectedly the decline in home ownership has been concentrated on those aged under 55. Home ownership
among persons aged 25–34 declined from 38.7% in 2002 to 29.2% in 2014, with much of the decline occurring between 2010 and 2014. Among persons aged 35–44, home ownership declined from 63.2% to 52.4%, and among persons aged 45–54, it declined from 75.6% to 67.4%.

The report also found that the single most important asset component in household wealth portfolios is the family home, accounting for 43% of the value of household assets in 2014.

Falling ownership rates amongst first home buyers are also borne out by ABS statistics on housing finance.
The proportion of first home buyers, as part of the total owner-occupied housing finance commitments in May 2016, fell to 14.2 per cent and is the lowest since May 2004. This is despite 18 interest rate cuts in that time.

With first home buyers finding it increasingly difficult to enter the housing market, home ownership in Australia is declining after four decades of stable levels.

With forecast strong population growth in Australia as well as changes in the demographic composition it is a policy priority that the supply of affordable housing is addressed.

Affordable housing is a complex issue, with a number of economic, social and infrastructure factors influencing it. These include: the deposit gap for first home buyers; demographic change; the effect of stamp duties and taxes; development application processes, skills shortages and; lack of urban infrastructure.

At a roundtable discussion on housing affordability convened by the REIA in 2014 with participation by Government and industry leaders from real estate, construction, finance and community sectors, it was agreed that the availability of affordable housing is a goal that is shared by governments and all sectors of the community. It impacts on the functioning of the economy as well as the wellbeing of individuals and the cohesiveness of communities and society. According to the HILDA report owning a home is such a gold standard in Australia that it acts as a predictor of many other social indicators.

The roundtable participants all agreed that a priority policy issue is to address the undersupply of housing.

REIA strongly believes in the benefits of continuing the high ownership level in Australia, particularly as the population ages, and strongly advocates that the Commonwealth Government take a lead in helping to implement solutions that will assist aspiring first home buyers. Australia needs a suite of measures that both federal and state governments can collectively action. Such assistance should be uniform and should not discriminate between buyers of new or established housing.

Home ownership has always been the biggest single financial commitment that Australians will make in their lifetimes – and the biggest source of financial security as they head into retirement.

Superannuation is the second most important financial asset of Australian households. The HILDA report shows that for men aged 30 to 34 their superannuation balances are on average around $50k and for women in this age group the average balance is around $30k. The average balances increase to around $75k for men and just under $50k for women in the age group 35 to 39.

Allowing access to a proportion of superannuation funds would help prospective buyers to bridge the deposit gap faster.

Superannuation and home ownership are both components of a retiree’s “nest egg” and not competing products. By buying earlier in life retirees have every prospect of having a higher equity on retirement and a larger “nest egg” on downsizing. Too much attention has been focused on the accumulation of a nest egg through superannuation at the expense of other more practical considerations which not only improve the quality of life at an earlier age but result in a greater retirement “nest egg”.

Access to superannuation for the purchase of a first home could help reverse the trend of falling home ownership and address the looming significant policy problem of large numbers of long-term renters aged 45 years and over remaining in the rental sector and possibly requiring rental support in later years.

The use of retirement savings for a first home purchase has already proven to be successful in Canada, New Zealand and Singapore.

Much has been written about younger persons having different priorities to their parents. Despite this the dream of owning your own ‘castle’ has changed little. More and more first home buyers today are buying an investment property that they tend to move into later. A survey by Mortgage Choice last year showed that 36.6% of investors were first-time buyers – up from 21.1% the previous year. This trend is confirmed by a Genworth survey which shows that nearly 30% of first home buyers buying an investment property did so because they weren’t able to meet the deposit gap for their desired first home property. A further 24% said that renting out the property helps pay off the mortgage faster.

Whilst increasing numbers of first home buyers are taking this path to home ownership this is not the long term answer. Housing affordability has remained in the “too hard basket” for too long. The release of the HILDA report is a timely reminder that the issue won’t go away.

This article was first published in the August edition of REIA News.