Living – All Property Living

The greatest Australian dream has been to own your own home. Is this statement actually the case? Can we see a increasing rate of home ownership vs renting? According to the Australian Bureau of Statistics (ABS) in the last census, 2019 to 2020, home ownership was broken into two categories. These two categories are, ownership with the mortgage and ownership without mortgage. In the 2019- 2020 census data 66% of Australians own their own home with either a mortgage or without a mortgage. While rental rates were 26.2%. The remaining 7.8% include rental as part of government housing authorities, 2.2%, and those who did not answer. This was consistent with the previous census in 2017-2018 that also showed 66% of ownership Looking at these trends over time, you can start to see if 66% ownership rate is the normal state of affairs. This article will further investigate these trends, and try to identify some reasons why these are the case and passible future expectations. Long Term Trend on Home Ownership or Renting As seen in the graph below, there has been a larger increase into the homeownership with a mortgage and a private renter. With home owners without a mortgage being fewer. Home owners with a mortgage and renters seem to increase parallel with one another over the last 20 years. When grouped together, there has been a decline in home ownership over the past 20 years by 5%, with a increase in rental occupancy by 5.2% How does Australia Home Ownership Compare to Other Countries? In the United States since 1965 through to 2023 home ownership rates have fluctuated between 63% to 69%. Currently in 2023 home ownership rates in the United States are at 66%, see HERE. In England approximately 64% of dwellings were estimated to be owner occupied with 36% of dwelling privately or socially rented. This rate has been relatively consistent since 2007, see HERE. In Canada, based on their census data from 1971 to 2021 homeownership rates have fluctuated between 60.3% and 69%. The current Home ownership rate as of 2021 is 66.5%, see HERE. Australia's current rate of 66% does not seem to be any different to other western countries with similar tax and investment laws with respect to real estate. Is Australian home ownership A affordability issue? The survey of income and housing (SIH) by the ABS and incorporated into the latest census, helps to give a overview on person's affordability index. Some of the questions, see HERE, include valuation on current property, current income, current assets, investment loans, rental property loans, school attendance costs, education loan payments, and salary sacrifice, last years annual declared income, business income, family tax benefits just to name a few. This comprehensive survey, if answered honestly, should provide a thorough understanding on a person's affordability with respect to home ownership costs. Adjusted for inflation, since the year 2000, housing costs having increased by 40% for homeowners with a mortgage, 50% for homeowners without a mortgage and 50% for private renters. Housing costs where defined as the sum of rent payments; rate payments (water and general); and mortgage or unsecured loan payments. see graph below However, the housing affordability ratio doesn't seen to have changed. This ratio measures housing affordability of housing costs to gross household income with information gathered as part of the SIH. For the years 2000 to 2020, see graph below, the average housing costs for owners with the mortgage equates to 15.5% of their gross income, while for renters its 20.2%. Weekly household income has also seen a increase of 56% in the last 10 years, while affordability for the average house seems to be consistent, or does it? Affordability Compared to the Median Wage and Inflation One of the biggest gripes is that housing is becoming unaffordable. This topic is large and requires more detailed analysis beyond the scope of this article, but it would be fair to point out a few interesting observations. How much house do you get for your dollar? Affordability of repayments over time How many houses do you get for your dollar? In Brisbane, the average price a a house in 1973 would cost $17,500. Today, based on inflation that amount would be worth $185,645.18. The average price of a house in Brisbane today is around $750,000. In 1973 based on inflation, the starting price would be roughly $71,000. In essence, just based on inflation, todays price is the equivalent of (71,000/17500) = 4.08 houses. The average wage in 1967 in Queensland was $56 or $798 in todays terms. During the 1970's 38% to 45% of women where also employed. So the amount of households disposable income may have been equivalent or more than what the median household income receives today, $1124 per week. The argument is, and not looking into interest rate and other standard costs of goods and services, that housing was far more affordable in the 1970's than today. That is, $17500/ (56*52) = 6 times annual earnings. Today, that number is, $750000/($1124*52) 12.8 times annual earnings. Further insights need to be investigated to get at the heart of the affordability issue. Such questions in another post would touch on, If owning a house was more affordable, with everything else being relative, would this mean more people would become home owners? Is affordability just a wage consideration as opposed to a repayment affordability issue? How much more do you get for your money today? Is the standard of living greater today than it was in the 1970's, and rising costs are just a symptom of higher standards? There are many questions on perhaps why home ownership sits around the 60% range, but all in all, Australia does not seem to be any different in home ownership rates than other established countries, with the majority of people choosing to buy a home.