Stamp duty constraints impede home ownership: AHURI
There are indicators that home ownership is starting to decline, the Australian Housing and Urban Research Institute (AHURI) suggests.
However, Australia has maintained consistent rates of home ownership of around 68% since 1976.
"The composition of homeowners, those who own outright and those who are currently servicing a mortgage, has changed with houses under purchase now out numbering those owned outright.
"The last 20 years has also seen sharp growth of migration to Australia and this may have played a role in sustaining home purchase rates."
"The rate of home ownership is higher amongst older age groups, with 55-64 year olds maintaining around 80 per cent ownership rates over the last 30 years to 2011."
In the submission to the House of Representatives Standing Committee on Economics, AHURI observed that home purchase has decreased mostly for those in the lowest income cohorts, particularly for those aged 24-35 years.
"Between 1981 and 2011 the rate of purchase for those in the lowest household income quintile fell from 62.7 per cent to 31.3 per cent.
"In interviews with 87 Indigenous people living in various forms of rental housing, AHURI research found that most saw home ownership as an economic burden even when income was assessed not to be a barrier for a quarter of households.
"Home ownership for some is a more complex due to the relationship with land and implications of individual ownership.
"A study of home-owners found that around 13% of owners ‘churn’ in and out of ownership while 9% permanently leave. There has been a reduced ability to maintain home ownership due to increased divorce rates and mortgage stress.
"Increasing numbers of homeowners are approaching retirement with mortgages, and a sizeable number of older mortgagees are dropping out of homeownership which is a flag for potential pressure on other areas of the housing system such as a need to access housing assistance."
Aspects affecting home ownership rates include the increase in house prices and increase in size and period of debt. There is also the positive side of wealth creation for home owners, but this does not happen without risk.
"AHURI research which looked at metropolitan Melbourne found that one in eight of all sellers lost money in real terms and that there is greater risk of making a loss for dwellings in outer urban areas where low to moderate income earners are most able to purchase, and if the dwelling is sold in the first three years.
"However, higher house prices—while aiding wealth accumulation for those who own or are purchasing—hinders access for aspiring first home buyers.
"AHURI research also indicates that owners are now more accustomed to using new flexible mortgage products to access their housing wealth, and so use that wealth as a financial buffer to meet needs over time."
AHURI believes that if supply does not match demand it can be a contributing factor to house price pressures and declining affordability.
"Low interest rates, lower unemployment combined with easy credit for housing, have worked together to increase demand.
"New household formation is a driver for demand for housing. Traditionally this has been seen as part of the ‘housing career pathway’ when partnering and leaving home or moving from private rental to home ownership.
"Immigration creates new households and therefore increases demand for housing. AHURI research suggests that migrants historically have had a higher purchase rate than native-born Australians.
"Population projections show that the rate of population increase is expected to be steepest among people aged 65 year and over and this will translate into a surge of singles living alone.
"Population ageing poses demands for smaller housing in nearby suburbs to enable downsizing and equity release.
"AHURI research found that difficulties faced by downsizers included availability of suitable housing, its cost and affordability, and the suitability of its location.
Evidence is varied on whether land release assists in reducing house prices.
"AHURI research has documented that connections between land supply and price, which can flow on to house price, are complex with many factors affecting both land and house prices. However, a well-run and timely land release policy can help with the supply of new houses.
"With a strong, nationally coordinated policy framework emphasising housing affordability and dedicated affordable housing creation, state housing policy and planning legislation then promotes affordability, and enables affordable housing creation, through:
- system-wide approaches to facilitate land supply in preferred locations, by making planning processes more efficient and through targeted infrastructure investment;
- better needs assessment and planning methodologies to forecast, monitor and respond to housing demand, supply and affordability trends;
- specific planning levers or mechanisms to secure land for new affordable housing development and retain existing levels of low-cost housing.
"The proportion of new loans for investment housing is at a record high. Up until 2010, lending for owner occupied housing was tracking well above investment housing, however this trend has changed since 2010 after which lending for investment has continued to rise but housing finance commitments for owner occupation started to decline.
"AHURI research finds that stamp duty is found to impede access to home ownership because it tightens borrowing constraints.
"The provision of the First Home Owner Grant (FHOG) raises the rate of home ownership and accelerates ownership, but research finds it is regressive in impact as it primarily favours those that would have eventually become home-owners.
"Younger (less than 45 years of age) owner-occupiers, most of whom have relatively low equity in their dwellings and face high mortgage debt, are relatively disadvantaged by the structure of tax expenditures because of their inability to deduct the costs of purchasing their home from the income it produces.
Recent AHURI research examined government spending related to housing in Melbourne for the 2011–12 financial year. The total housing expenditure figure for Melbourne was $5.2 billion.
"Public housing was the smallest proportion of this figure, at around $107 million or 2 per cent of the total; the First Home Owners Grant, for both new and existing properties, had an outlay of $277 million, 5.3 per cent of the total.
"Rental assistance had a total of $500 million (9.6% of the total). These expenditures were eclipsed by the negative gearing ($861 million) and capital gains tax exemption ($3.5 billion) estimates, which comprised 17 per cent and 67 per cent of total outlays respectively."
