Young Australians are increasingly likely to live most of their lives in high-density rented accommodation – and that’s not necessarily such a bad thing.
That was one of the more controversial findings of a major study into the housing market released in recent days.
The Committee for Economic Development of Australia (CEDA) concluded that capital city home ownership would continue to be unaffordable for at least the next four decades.
It was grim news for many young Australians, particularly those who have bought into the Aussie dream of owning their own house and backyard in a spacious suburb.
But the study argued that a lower level of home ownership, and/or a greater level of high-density living, need not be a bad thing.
In fact, examples from overseas – and even some in Australia – suggest it could be a positive. But this would require a massive shift in policy and, more importantly, attitude.
What clearly emerged from the report is that there is no one culprit behind the property price explosion; rather, the picture is of a tangled mess of convergent causes, most of which will not go away.
CEDA blamed all the usual suspects, including foreign investment, negative gearing, capital gains tax rules, interest rates, increasing urban population, limited land supply, restrictive planning rules, and the tendency of stamp duty to discourage retirees from downsizing.
Professor Rodney Maddock, CEDA’s research and policy committee chairman, said the research showed that “barring any major economic jolts, demand pressures are likely to continue over the next 40 years and supply constraints will continue”.
In other words, if you’re holding out for the “bubble” to burst before you make your move, you may be waiting a long time.
Many of the partial solutions were equally as predictable: replace stamp duty with a land tax; raise capital gains tax on investment properties; loosen planning restrictions; and improve infrastructure to more remote suburbs.
While all of these would help the situation, none would comprehensively reverse the astonishing increase in property prices over recent decades.
The result of all this is that more and more people will be forced to rent – which, indeed, has already been happening.
In 1982, the report showed, just over 40 per cent of 25- to 34-year-olds were renters. Now it’s closer to 65 per cent. The proportion of renters has increased in every age group over that time period, excluding the over-65s.
Predicting this trend will continue, CEDA recommended improving tenancy laws to “provide adequate protection and certainty to long-term renters”.
It pointed to countries such as Germany, the Netherlands and Sweden, where “long-term contracts exist within the private rental market, and termination is only possible in limited circumstances”.
The case of Germany is an interesting one. Only 52 per cent of Germans own their own home, compared with 67 per cent of Australians. Given Germany is a developed country with a high standard of living, this shows home ownership is not a prerequisite for wellbeing.
At the end of the report, CEDA presents a utopian, and occasionally dystopian, vision of high-density living. It takes the example of an existing high-density development in Sydney’s northern beaches, called ‘The Village’.
A particularly irksome passage talks about a “hierarchy of spaces to create an intuitive sense of public and private space, without excluding non-residents from the residential parts of the site”.
While this vision may be off-putting, the fact is this sort of development is the most logical answer to the problems raised by the report. It makes economical and sustainable use of space, and in so doing solves many of the problems we are currently facing.
However, embracing such an ‘un-Australian’ style of accommodation would clearly require a fundamental shift in attitude.
But if we don’t make this shift, many younger Australians may find their quality of life greatly diminished, as more and more of their pay goes towards servicing massive mortgages, paying inflated rents, and simply getting to and from work.