AU Gen Y locked out of housing market as prices soar
Property Here - Thursday, August 08, 2013
Brisbane couple Megan and Michael Hughes are happy to have bought their own house. Picture: Darren England. Source: News Limited
GEN Y is being locked out of the Great Australian Dream, with house prices soaring to seven times the average household income.
A decade ago, a typical home cost just four times the average household income.
Fewer than half of Australia's 24 to 35-year-olds are homeowners, with the rate of home ownership crashing from 61 per cent in 1981 to 47 per cent in 2011.
And the proportion of Australians spending more than a third of their income on mortgage repayments has jumped 20 per cent since 2006.
Established house prices have grown an average of 6.7 per cent each year over the past decade, the Australian Institute of Health and Welfare said in a new report yesterday.
It warned first home buyers were being locked out of the market, despite record low interest rates.
"Strong house price growth affects households differently, with some homeowners and investors enjoying a surge in wealth while potential first home buyers may be locked out of home ownership in a private rental market where rents have risen strongly in recent years,'' it said.
The institute's director, David Kalisch, said the boom in house prices before the global financial crisis, combined with higher unemployment, was putting housing out of reach for some gen Y buyers.
"There is difficulty for some young adults to break into the labour market,'' he said.
"There is a trend to stay in education longer, and establish relationships later.''
Mr Kalisch said Australians were now more likely to have a mortgage, than to own their home outright.
"Many are refinancing, and with house prices going up people are not taking out higher loans and taking longer to pay them off,'' he said.
The report shows Australians are living in bigger houses the proportion of homes with more than four bedrooms has doubled to 30 per cent since 1986.
Australian Council for Social Service chief executive Cassandra Goldie yesterday said Gen Ys were pushing rents higher because they could not afford to buy.
"People who previously would be buying their first home are not able to do so, so they're bidding up the price of rents substantially in all the major cities,'' she said.
"If we don't fix the housing crisis in Australia we will see a growing rate of poverty.
"Living on the age pension is only manageable if you've paid off your home, and if you are trying to survive in the private rental market you will be living in poverty.''
Housing Industry Association spokesman Greg Weller said it was "worry'' that the next generation of families could not afford to buy a home.
"Owning your own home is the cornerstone of financial security after retirement,'' he said.
"If we have a whole generation who don't own their own home when they retire, that is a big financial question for the community.''
Mr Weller said 25,000 fewer homes would be built in Australia this year than a decade ago.
He said taxes such as stamp duty and development levies inflated the cost of new homes in Sydney by as much as 44 per cent.
National Housing Supply Council statistics reveal a 20 per cent jump in the number of households spending more than a third of their income on the mortgage, between 2006 and 2011.
Australia wide, one in 12 homeowners spent more than a third of their pre-tax earnings on mortgage payments in 2011.
In NSW, one in 10 homeowners spent more than a third of their pre-tax earnings on mortgage payments in 2011 up 9.4 per cent in five years.
In Victoria, one in 10 homeowners spent more than a third of their pre-tax earnings on mortgage repayments in 2011 up 16 per cent five years.
In Queensland, nearly one in 10 homeowners spent more than a third of their pre-tax earnings on mortgage repayments in 2011 up 26 per cent in five years.
In South Australia, one in 11 homeowners spent more than a third of their pre-tax earnings on mortgage repayments up 27.5 per cent in five years.
In Tasmania, one in 13 homeowners spent more than a third of their pre-tax earnings on mortgage repayments up 34 per cent in five years.
In the Northern Territory, one in 13 homeowners spent more than a third of their pre-tax earnings on mortgage repayments, up 28 per cent in five years.
Read more: http://www.news.com.au/realestate/news/gen-y-locked-out-of-housing-market-as-prices-soar/story-fncq3gat-1226693871245#ixzz2bq6Q5YuT