Coronavirus house price falls unlikely to increase home ownership: AHURI

author-avatar By 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
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

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%
LIMITED TIME OFFER

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%
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES

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 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. Rates correct as of October 27, 2021. 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 which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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author-avatar
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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