Finance Property Census makes it official: young Australians are priced out of home market

Census makes it official: young Australians are priced out of home market

young home owners
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Home ownership has continued to fall among younger Australians, the latest census has revealed.

The Australian Bureau of Statistics provided data to The New Daily on Thursday that confirmed home ownership among the classic ‘first home buyer’ demographic – those aged 20 to 39 – declined again in the 2016 census.

It showed that only 36 per cent of people aged 25-29 said they owned their home outright or with a mortgage – likely the lowest level since at least the 1960s.

Home ownership for the next age group, 30-34, also declined, to 49 per cent, which is likely another record low.

And 35 to 39 year olds also dropped to 58 per cent, down from 61 per cent in the previous census in 2011.

The data is similar to that provided by the ABS to Tim Colebatch at Inside Story.

home ownership younger australians

In fact, rates of fully paid or mortgaged home ownership declined in all groups up to the age of 64.

Overall rates of home ownership did not drop dramatically between the 2011 and 2016 census, as older age groups – which are gradually accounting for a larger share of the population – actually increased their ownership.

The cause may not be as simple as many think.

Similar analysis of home ownership rates by Dr Judith Yates, one of Australia’s leading housing economists, apportioned more than a small part of the blame to growing economic inequality.

home ownership older australians
Dr Yates provided an estimate of ownership rates to a Senate inquiry in 2015, along with a detailed explanation of the causes.

In her submission, she blamed many of the usual culprits, such as declining rates of marriage and fertility among young people (which makes them less eager to buy homes), rising prices, tax concessions for investors, the scarcity of urban land for development, and demand pressures from population growth.

But Dr Yates characterised several of these factors in a way many others had not: as a consequence of worsening income and wealth inequality, beginning in the 1970s, which she dubbed “The Disappearing Middle”.

“Increasing inequality continued through from the mid-1990s until the late 2000s, having accelerated between 2003-04 and 2009-10 as a result of its uneven economic growth generating disproportionate benefits for those in the top half of the income distribution,” Dr Yates wrote in her 2015 submission.

“Disproportionate growth in incomes at the top end of the income distribution meant increased borrowing capacities for households with high home ownership propensities.”

dr judith yates
Dr Judith Yates has blamed growing income and wealth inequality for much of the fall in home ownership.

Her submission also blamed the increasing income disparity on uneven economic growth; high inflation and high interest rates in the 1980s; the burden of HECS debts; and the fact that the financial liberalisation of the 1990s “benefited high-income households”.

“Encouraged by persistent and high capital gains from the mid-1990s generated by population and real income growth and underpinned by housing supply shortages, established households – the primary beneficiaries of increasing income and wealth inequalities – increased their demand both for owner-occupied housing and, increasingly, for investment housing.”

Dr Yates noted that tax concessions for landlords, such as negative gearing and the capital gains tax concession, are also “biased towards high-income households”.

In a way, this is good news. The fact that most of Australia’s mortgage debt is held by “high-income, high-wealth households”, as Dr Yates put it, makes the economy less likely to undergo a US-style mortgage crash, as the Reserve Bank has noted many times, because that global crisis was driven by a boom in lending to low-income households.

The bad news, confirmed by the latest census, is that younger Australians are increasingly squeezed out of the market, not just by demographic change, but by the greater accumulation of wealth at the top of society.

As Dr Yates wrote: “These are the households with an economic capacity to outbid many potential first home buyers and who benefit from tax privileges that provide them with an incentive to do so.”

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