The great Australian dream of home ownership could lose its lustre if rental agreements are able to provide a sense of stability, says a Deloitte partner.
Deloitte financial services partner James Hickey told Mortgage Business that while home ownership is an aspiration for many Australians, strengthened leasing structures could shift some of that focus.
Mr Hickey explained: “A lot of people say the uncertainty of renting almost further encourages them to purchase property so they have greater control of their destiny, but a lot of that is because often leases are 12-month leases and they then go onto rolling one-month leases, where if you don't renew it there's uncertainty as to whether the landlord will put the price up; will you be able to afford that? Does that mean you'll need to move out of your area you're familiar with?”
Pointing to capital cities around the globe with a focus on units and “smaller footprint accommodation” as opposed to the traditional Australian quarter-acre-block, Mr Hickey said there is a need to reassess the types of properties that are “desirable and acceptable in this modern day”.
Acknowledging that the appetite for home ownership will always be strong, Mr Hickey said longer-term leasing structures for five-, seven- or 10-year terms have the potential to change the perception of renting as they provide “a degree of permanency”.
Mr Hickey also pointed to flexible workplaces that grant people alternative working hours to relieve the pressure of a long commute as having potential to alleviate the housing bottleneck occurring around the CBDs of Sydney and Melbourne.
He commented: “There are a lot of other societal things that could be made to actually divert the sole focus from it being an aspiration to buy a property — which is still fine and will be strong with people.”
Rental affordability falls while housing affordability improves
Housing affordability across the country improved in the March quarter of 2017 as the proportion of income required to make loan repayments decreased by 1.3 per cent to 30.4 per cent.
At the same time, however, the number of first home buyers across the country decreased by 11.2 per cent to 20,677, according to the latest Adelaide Bank/Real Estate Institute of Australia (REIA) Housing Affordability report. The average first home buyer loan size fell by 0.4 per cent year-on-year and 3.2 per cent over the March quarter to $313,433.
Rental affordability across the country also dropped as the proportion of income required to meet rent payments increased by 0.1 per cent to 24.6 per cent. This number, however, represents an improvement of 50 basis points year-on-year, dropping from 25.1 per cent of family income in March 2016 to 24.6 per cent in March 2017.
Malcolm Gunning, president of the REIA observed that rental affordability had declined “markedly” since the June quarter of 2007 and dropped to its lowest point in the 2010 March quarter. He noted however, that affordability had been improving from the end of 2011.