Research by the Australian Housing and Urban Research Institute (AHURI) indicates that first home buyer rates are lagging behind in comparison to previous generations, with governmental assistance required to maintain high living standards.
The research, ‘Transitions into home ownership: a quantitative assessment’, undertaken for AHURI by researchers from University of Sydney and RMIT University, seeks to outline the economic constraints placed on aspiring homeowners.
“Our research certainly shows that over the last 30 years, ownership rates for households at age 30 to 34 have declined substantially; from 65 percent of people born in the mid to late 1950s being home owners by age 30 to 34, to only 45 percent of people born in the mid to late 1980s’, says University of Sydney’s Stephen Whelan, one of the Authors of the research.
“This fall in ownership rate has happened as house prices have nearly tripled, indicating that increasing house prices and falling affordability are associated with a delay in housing market entry for Australian households.”
Whelan is quick to point out that while the age of first homebuyers are getting older, the younger groups are actually less likely to buy a home later down the line.
“But more importantly, while this may represent in part simply a delay in younger Australians buying a home, our research shows that as these younger groups of people grow older they are less likely to catch up and buy a home.
“After ten years, the ownership rate ‘gap’ when comparing the 1950s cohort to the 1980s cohort (at age 40 to 44) has closed by less than half, and after 20 years (at age 50 to 54), the ownership rate is only around 75 percent of the 1950s group.’
There are concerns that if younger age groups do not catch up to fellow homeowners and purchase their own property that living standards may decrease.
“One of the key constraints younger people are facing in wanting to buy a home today is the need to save enough to be able to pay a deposit or downpayment,” Whelan says.
“If we measure housing affordability by the time required to save for a deposit for a ‘typical’ dwelling for an ‘average’ household, we see that in markets such as Sydney and Melbourne it now takes over six years.”
Parents acting as loan guarantors is becoming an increasingly prevalent way for youngsters to get into the market, with research analysis indicating that a transfer of $10,000 is associated with nearly double the probability of a younger household buying their first home.
“While transfers of cash from parents to children is part of that family support there is also an increasing tendency for younger Australians to reside in their parents’ home. This allows younger Australians to accumulate savings in the order of $300–$400 per week that can be used to buy a home,” says Whelan.
”Every additional year that a young person lives at home, as opposed to renting elsewhere, leads to an increase in the odds of transitioning into first-time home ownership of approximately 30 to 40 percent. Similar to direct money transfers, this in kind assistance provides an important, albeit informal, way into home ownership.”
Australian statistics show that wealth and property ownership go hand in hand, with the largest growth in wealth attributed to outright homeowners, with renters experiencing a minimal wealth increase. Researchers for the AHURI study believe that government policies must be directed at first homebuyers in order to maintain living standards and increase the personal wealth of the general public.
To read the report in full, click here.
