In 2015, despite historically lowest interest rates, housing affordability remains low in Australia.
Over the five years to 2011, home ownership declined by 1.1 percentage points to 67% of occupied private dwellings. The drop was evident across all states and territories prompting a question on whether this was the beginning of an irreversible trend. The National Housing Supply Council, in its 2012-13 report, shows that it seems certain that the rate of home ownership will drop further.
The Australian Bureau of Statistics’ (ABS) Census data shows that the rate of home ownership in Australia was at its highest at 71.4% in 1966 and since then lost 4.4 percentage points. The gradual decline, however, was accompanied by slight rises and falls along the way. Figure 1 shows the rate of home ownership in Australia since 1947.
A comparison of the Census findings with the Real Estate Institute of Australia’s (REIA) data shows direct links between changes in the rate of homeownership and the level of housing affordability between 1996 and 2011. The 2001 Census recorded over the five years to the Census night, the rate of home ownership increased from 69.0% to 69.5%. The REIA data shows that over the same period, the proportion of the median family income required to meet average loan repayments decreased from 26.6% to 25.8% – and indicator of the better housing affordability. The Censuses for 2006 and 2011, however, showed the home ownership rate since then declined to 68.1% in 2006 and further to 67.0% in 2011. During that period, housing affordability worsened with the proportion of median family income required to meet average loan repayments going up to 33.2% in 2006 and further to 35.2% in 2011.
In 2015, despite historically lowest interest rates, housing affordability remains low in Australia. With the most affordable housing being available on the outskirts of cities despite most jobs located in the cities’ CBDs. As a result, many potential buyers turn to renting.
ABS’ data shows that over the last thirty years, around one-third of Australians lived in New South Wales; a quarter resided in Victoria and Queensland accounted for 18% of the national population. Eight per cent of Australians lived in South Australia and one in every ten Australians resided in WA. An analysis of the distribution of investment housing finance commitments shows that New South Wales and Queensland accounted for larger proportions of investment housing finance commitments compared to the share of the population residing in these states and also compared to the share of housing finance commitments by owneroccupiers.
The Census shows that that New South Wales and Queensland have the lowest home ownership rates, 66.6% and 63.5% respectively. The rates are below the overall rate for Australia of 67%.
With investment housing finance commitments currently increasing – making up forty per cent of the total housing finance commitments in Australia – the further drop in the rate of homeownership as anticipated by the National Housing Supply Council seems to be likely.