Coronavirus house price falls unlikely to increase home ownership: AHURI

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on May 07, 2020
Coronavirus house price falls unlikely to increase home ownership: AHURI

Photo by Mitchell Luo on Unsplash

Home ownership across Australia is predicted to fall despite house price falls brought on by the COVID-19 economic crisis.

Despite worst-case predictions of a 30% drop in house prices, research from the Australian and Urban Research Institute (AHURI) found that in the context of the current crisis, events like the Global Financial Crisis (GFC) which produced major falls in house prices did not create a return to home ownership.

This was due to fiscal austerity, a lack of finance, weakened household income, and buyers being outbid by investors.

Looking ahead, the research found that current seemingly high rates of home ownership in Australia are masking a long-term problem of "serious housing inequality" between older and younger generations.

The report, released on Thursday, estimates that just over 50% of households within the 25-55 age bracket will own a home by 2040. This is compared to 60% of households in that age bracket who owned their homes in 1981.

When taking into account all households (which includes those over the age of 55), Australia's overall home ownership rate appears to have remained high. In 2016, 67% of Australians owned their house - slightly less than 68% in 1976. 

Buying an investment property or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for investors.

Lender

Variable
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UNLIMITED REDRAWS
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
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UNLIMITED REDRAWS

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
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100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
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REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
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AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
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AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
  • Low rate home loan with added benefits, add offset for 0.10%
  • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
  • Get a 7.0 star NatHERS rating or higher for up to 1.59% discount on your variable rate home loan T&Cs apply

Green Home Loan (Principal and Interest)

  • Low rate home loan with added benefits, add offset for 0.10%
  • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
  • Get a 7.0 star NatHERS rating or higher for up to 1.59% discount on your variable rate home loan T&Cs apply

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 7, 2022. View disclaimer.

However, researchers found the overall steady rate of home ownership over time is largely attributable to Australia's ageing population, which lead researcher Professor Terry Burke of the Swinburne University of Technology says is a "recipe for long-term social problems".

"A housing system in which one half—predominantly older homeowners—acquires wealth and the other half—generally younger renters—doesn’t, is a recipe for long-term social problems," Professor Burke said.

The overall rate of home ownership is estimated to drop to 63% by 2040. Between the 1940s to 1970s, home ownership rates peaked above 70%.

The research, undertaken by Swinburne University of Technology, showed that while housing affordability has played a part in declining levels of home ownership, complex shifts throughout the entire institutional environment - rather than a single policy failure, political decision or market failure - has collectively worked to undermine home ownership levels.

These include the casualisation of the workforce, a finance and tax environment favouring rental investors, housing products designed for rental living, a lack of housing supply, and the financialisaton of housing.

"The financialisation of housing is an international factor and is best understood as the process where housing is treated as a commodity to be invested in rather than a home, meaning more and more money flows into housing but without any necessary improvement in housing supply or quality," Professor Burke said.

Professor Burke said Australia has an institutional environment which no longer supports home ownership.

"This means the housing system will become more inequitable irrespective of what incremental housing policy reforms are made. Given this, we have to rethink what sort of housing system is appropriate for Australia’s future.

"Either we embrace fundamental and broad-based reforms to rebuild ownership or we accept a retreat from its historical dominance, moving to a system which has more balance between rental and ownership—what we can call a dual tenure system."




Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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