01-11-2015, 09:14 PM
Interesting country... sustain growth in population coupled with declining home ownership will mean that investors will continue to derive value via rental yield and gradual capital gains over the wrong term...
Home ownership policy a failure for 50 years: Saul Eslake
Home ownership rates have fallen to their lowest levels in more than 50 years as growing numbers of young adults abandon the great Australian dream.
Former senior banking economist Saul Eslake said that housing affordability had also not improved during this time, despite years of government subsidy programs and low interest rates.
It appeared that negative gearing and first-home buyer grants had mostly lifted the price of established homes, rather than boosting ownership rates or significantly lifting housing construction.
“Australia’s home ownership rate is actually the lowest it’s been since 1954,” said Mr Eslake, a former chief economist at ANZ and Bank of America Merrill Lynch. “Since the mid-1960s, home ownership rates have been steadily declining.
This effectively means Australian housing policy has been failing in terms of its stated objectives (to boost home ownership) for the best part of 50 years.”
The ownership rate revelations come as speculation continues that the Reserve Bank could drop interest rates again tomorrow, off the back of an unexpected fall in inflation and banks lifting market mortgage rates, blaming rising capital compliance costs.
Over the past fortnight, the four major banks have lifted mortgage interest rates, with Westpac’s up by 0.2 percentage points, ANZ by 0.18, the Commonwealth Bank by 0.15 and NAB by 0.17.
Mr Eslake said there had been little progress in boosting home ownership and housing affordability (prices compared with average income) in Australia despite interest rates over the past 20 years being roughly half of the rate of the previous 20 years.
“During this time governments have (also) spent billions of dollars through first-home owner grants and tax concessions ostensibly in the name of promoting home ownership,” he said.
Despite this, home ownership rates were the lowest they had been since the 1950s and population growth rates had started to outstrip new housing supply. Mr Eslake said home ownership rates in the 25-45 age bracket had declined by about 10 percentage points over the past 20 years.
This meant more people would retire without owning a home, putting pressure on the welfare system as more superannuation money was spent on housing, and lifting rental market competition.
At the time of the 2011 census only 47 per cent of 25 to 34-year-olds were in the housing market, compared with 61 per cent in 1981. For 35 to 44-year-olds, home ownership had fallen from 75 per cent to 64 per cent over that period.
“If nothing changes then home ownership rates will continue to decline,” Mr Eslake told a PowerHousing Australia Forum in Brisbane. “As this age cohort (25-45) rolls up into older age groups, it’s not as if they are going to be able to get 25-year mortgages in their late 50s so they can be a first-home buyer.”
He said the “nature and severity” of the housing affordability problem was such that it required a long-term bipartisan agenda and significant policy changes to avoid major future problems.
The affordability gap in property was leading to a growing wealth disparity between home owners and non-home owners — up from $500,000 to $900,000 on average over the past 10 years.
There were also distortions in the figures because many people had fallen out of the home ownership equation.
The proportion of income spent on mortgage repayments for first-home buyers had fallen from 27 per cent to 22 per cent since the global financial crisis but this was mainly because the people who could still afford to enter the market had higher incomes.
The ageing population also meant there was a higher proportion of people older than 55, who typically were home owners. When national figures were rolled up, this masked falling home ownership in younger age groups.
Home ownership policy a failure for 50 years: Saul Eslake
- THE AUSTRALIAN
- NOVEMBER 2, 2015 12:00AM
- Shane Rodgers
[Image: shane_rodgers.png]
Queensland Editor
Brisbane
[img=650x0]http://cdn.newsapi.com.au/image/v1/2c390f099690d7e94edddc0eb63e1447?width=650[/img]
[*]Australia’s home ownership rate is the lowest it’s been since 1954, says economist Saul Eslake.
Home ownership rates have fallen to their lowest levels in more than 50 years as growing numbers of young adults abandon the great Australian dream.
Former senior banking economist Saul Eslake said that housing affordability had also not improved during this time, despite years of government subsidy programs and low interest rates.
It appeared that negative gearing and first-home buyer grants had mostly lifted the price of established homes, rather than boosting ownership rates or significantly lifting housing construction.
“Australia’s home ownership rate is actually the lowest it’s been since 1954,” said Mr Eslake, a former chief economist at ANZ and Bank of America Merrill Lynch. “Since the mid-1960s, home ownership rates have been steadily declining.
This effectively means Australian housing policy has been failing in terms of its stated objectives (to boost home ownership) for the best part of 50 years.”
The ownership rate revelations come as speculation continues that the Reserve Bank could drop interest rates again tomorrow, off the back of an unexpected fall in inflation and banks lifting market mortgage rates, blaming rising capital compliance costs.
Over the past fortnight, the four major banks have lifted mortgage interest rates, with Westpac’s up by 0.2 percentage points, ANZ by 0.18, the Commonwealth Bank by 0.15 and NAB by 0.17.
Mr Eslake said there had been little progress in boosting home ownership and housing affordability (prices compared with average income) in Australia despite interest rates over the past 20 years being roughly half of the rate of the previous 20 years.
“During this time governments have (also) spent billions of dollars through first-home owner grants and tax concessions ostensibly in the name of promoting home ownership,” he said.
Despite this, home ownership rates were the lowest they had been since the 1950s and population growth rates had started to outstrip new housing supply. Mr Eslake said home ownership rates in the 25-45 age bracket had declined by about 10 percentage points over the past 20 years.
This meant more people would retire without owning a home, putting pressure on the welfare system as more superannuation money was spent on housing, and lifting rental market competition.
At the time of the 2011 census only 47 per cent of 25 to 34-year-olds were in the housing market, compared with 61 per cent in 1981. For 35 to 44-year-olds, home ownership had fallen from 75 per cent to 64 per cent over that period.
“If nothing changes then home ownership rates will continue to decline,” Mr Eslake told a PowerHousing Australia Forum in Brisbane. “As this age cohort (25-45) rolls up into older age groups, it’s not as if they are going to be able to get 25-year mortgages in their late 50s so they can be a first-home buyer.”
He said the “nature and severity” of the housing affordability problem was such that it required a long-term bipartisan agenda and significant policy changes to avoid major future problems.
The affordability gap in property was leading to a growing wealth disparity between home owners and non-home owners — up from $500,000 to $900,000 on average over the past 10 years.
There were also distortions in the figures because many people had fallen out of the home ownership equation.
The proportion of income spent on mortgage repayments for first-home buyers had fallen from 27 per cent to 22 per cent since the global financial crisis but this was mainly because the people who could still afford to enter the market had higher incomes.
The ageing population also meant there was a higher proportion of people older than 55, who typically were home owners. When national figures were rolled up, this masked falling home ownership in younger age groups.