The Australian Bureau of Statistics (ABS) released their biennial survey of household income and wealth earlier this week. The release has a huge amount of valuable data, but I thought it was pertinent to look at the dwelling tenure data, at least initially.
The information is provided from 1994–95 up until the latest release (2015–16).The tenure data is premised upon who is currently residing in the property. This is important to understand because when we look at the proportion of residents who own a home without a mortgage, for example, this doesn’t necessarily represent the total number of dwellings owned outright. The reason being that some of those properties that are occupied by renters may be owned outright by the person who is renting that property out.
As at the 2015–16 release, 30.4 per cent of houses were lived in by someone that owned that property outright. This figure was lower than the 31.4 per cent in 2013–14 and it has been steadily trending lower over recent years. In fact, at the peak throughout the timeframe shown below, 42.8 per cent of households had no mortgage in 1995–96. This is an interesting statistic when you consider that many people suggest that lower mortgage rates result in improved housing affordability.
In June 1996, the standard variable mortgage rate was recorded at 9.75 per cent compared to a mortgage rate of 5.4 per cent in June 2016. The ongoing decline in mortgage rates has pushed dwelling values higher, and although it has made servicing mortgage debt easier, it has not led to a greater proportion of the population living mortgage-free.
With fewer households owning their home outright, there has been an increase in the proportion of households that live in a home that they own and still carry mortgage debt. In 2015–16, 37.1 per cent of households had mortgage debt, an increase from 35.8 per cent in 2013–14.
At its low point, [over the period 1994–95 to 2015–16] 28.1 per cent of households had mortgage debt in 1995–96. Since 2003–04, there has consistently been a higher proportion of households with mortgage debt than those without.
As the rates of outright home ownership have fallen, there has been a rise in the proportion of households that are rented. Whereas outright home ownership has continued to fall and ownership with a mortgage has risen, it is interesting to note how the proportion of rental households has actually declined since the last survey.
The latest data shows that in 2015–16, 30.3 per cent of households nationally were rented compared to 31.0 per cent in 2013–14. Back in 1994–95, only 25.7 per cent of households were rented.
As the prominence of renting has increased over time, the responsibility to provide rental accommodation has increasingly fallen on private citizens rather than the public sector. At its peak in 1995–96, 6.0 per cent of households were rental properties which were rented from state housing authorities. By 2015–16, this figure had fallen to just 3.5 per cent.
This is an important consideration for governments when considering potential changes to investment policies such as negative gearing. Governments are clearly not as involved in providing housing as they have been in the past. If private citizens or companies are going to be responsible for providing that housing, it is likely they will require some incentives other than just the rental income, escpecially considering how low rental yields are across Australian cities.
The charts presented highlight how home ownership is continuing to decline, which is leading to a greater proportion of the population either being in mortgage debt or renting.
As the population ages, this can create challenges, especially if an increasing number of Australians are retiring but still carry mortgage debt. It also highlights that simply building more homes is not necessarily a solution to increasing home ownership rates.
As we’ve seen over recent years, during a housing construction boom, first home buyer levels have been at near record-lows and housing investment levels have hit all-time highs.
Arresting the decline in home ownership in Australia will be no easy feat. However, the data indicates that simply building more housing won’t necessarily solve the problem, particularly if it isn’t at a price point which is reachable for lower and middle-income earners.
We would expect that over the coming years, the rate of home ownership will continue to fall, especially given that we have seen dwelling values continue to climb since June 2016.