AUSTRALIA has one of the least affordable housing markets in the English-speaking world and it is not just hurting young people wanting to buy their first home, new research shows.
The AMP-NATSEM (The National Centre for Social and Economic Modelling) report – released today – reveals the dream of home ownership is fading for many people.
House prices have jumped 400 per cent between 1986 and 2007 while income has risen just 120 per cent.
The report – Wherever I lay my debt, that’s my home – compares the 1995-1996 housing situation to the latest available data from 2005-2006.
It showed households needed 7.5 times their annual disposable income to buy a typical house in 2006, up 53 per cent from 1996 when households needed five times their disposable salary.
“Buying a home has always been a great Australian dream but it is fast becoming out of reach for many,” managing director of AMP Financial Services, Craig Meller said.
“Even those who may have been in the housing market for an extended period are likely to be feeling the strain.”
State by state
NSW is the country’s least affordable state, with homes costing 8.3 times annual disposable income – up almost 40 per cent on 1996 figures – while the Northern Territory is relatively cheap at five times disposable income.
Western Australia isn’t far behind NSW at 7.45 times annual disposable income after a 63 per cent surge in 10 years, while Tasmania saw the biggest jump, up 65 per cent to 6.1 times annual disposable income.
Compared with other English speaking industrialised countries, Australia has one of the least affordable housing markets with nearly 90 per cent of areas surveyed considered severely unaffordable.
Western Australia’s Mandurah is one of the most unaffordable places surveyed, ranked sixth behind centres such as Los Angeles and San Diego, in the US.
Queensland’s Sunshine Coast is ranked seventh least unaffordable while the Gold Coast and Sydney both ranked 11th.
Young and old
But it is not only the younger generation which is suffering from crippling housing affordability.
The report shows that older generations are taking more debt into retirement with more than twice as many people aged over 60 still paying off a mortgage compared with the same age group in 1995-96.
This group also experienced the biggest jump in housing stress which almost doubled to 9.5 per cent in 2006 from 5.3 per cent in 1996.
Outright home ownership has also dropped during the past decade to 34.3 per cent from 42.9 per cent and most notably in the 45- to 59-year age bracket to 35.8 per cent from 54.4 per cent.
The report found that in 2006 only one in 20 Generation Y households (15-29 years) own a home.
They also have the highest levels of housing stress, at 35.3 per cent.
Among Generation X households (30-44 years) housing stress accounted for 31.8 per cent, compared with 18.8 per cent of baby boomers (45-59 years).
Recent first home buyers, understandably, are the most vulnerable to housing stress, being the group with lowest incomes and faced with the highest house prices, putting 62 per cent in housing stress.
“This report clearly confirms what everyone has been saying about the booming housing market – more needs to be done before the great Australian dream of home ownership becomes unattainable for too many,” NATSEM director, and co-author of the report, Professor Ann Harding said.