The following is an overview of the current residential market in Australia, highlighting the generational wealth gap, low interest rates leading to increased demand and the problem of young people spending dead money on rent. It addresses problems faced by the young consumer population, real estate agents and other relevant stakeholders.
The barriers that are keeping Millennials and Gen Z’s out of the Australian property market are still considerable. The huge spike in property prices have seen the amount required for a deposit rise, and even in a market in which the government is willing to assist young people and contribute to their first home purchases, the price rise has been so fast as to price many out. Home loans still remain beyond the income of most young people. Affordability of housing is a large problem for younger generations. (Financial Stability Review, October, 2020)
COVID-19 has also had a negative impact on the younger generations, with under 40s being the most affected with job loss and stricter lending requirements for home buyers trying to enter into the market.
Young Australians are now left with the unwanted predicament, to pay a large portion of their wages on rents in desirable locations or move into rural areas to rent or buy, however not be guaranteed the same job opportunities.
2.1. Housing Tenure
ABS statistics- “found the proportion of those renting had grown to the highest level on record. Two decades ago, a quarter of all households were renting but that number has since grown to one in three. Australians are slowly becoming one of the highest renting populations in the western world. Our younger population believe in living week-to-week and find saving an impossible goal, showing a lack of education towards this cohort.
The main problems with property ownership in Australia, is supply and demand.
Housing costs continue to rise (increased 7.2% 2020/21), population continues to grow, particularly in capital cities.
Other factors that increased interest in 2021, of homeownership among 25–40-year-old are:
- Quantitative Easing causing inflation
- Low interest rates changes balance of buy vs rent comparison
- Other government schemes enabling homeownership
- Post-Covid market pump added investors to the mix
- Market analysis projects more upward movement
- Property investment: housing is treated as a commodity, a means of accumulating wealth and often as security for financial instruments that are traded and sold on global markets (Financialisation of Housing, 2019)
With housing prices rising, Australian’s are now preferring to rent rather than buy, which has shown the recent decline in house ownership. (Australia, Home Ownership Rates, 2015)
A recent research paper on Australian young people found ‘One in three (33%) Gen X and Gen Y Aussies, respectively, are worried about paying their rent or mortgage over Christmas, compared to just 5% of Baby Boomers.” (Urban, 2021)
The distribution of ownership of Australian households also depicts the same problem. According to the Australian Institute of Health and Welfare of 8.3million households surveyed.
- 67% (5.4 million households) were homeowners:
- 32% (2.6 million households) without a mortgage
- 35% (2.9 million households) with a mortgage
- 32% (2.6 million households) were renters, where landlord type was known:
- 26% (2.1 million households) were renting from private landlords
- 3.7% (300,000 households) from state or territory housing authorities
- 1.3% (105,500 households) from other landlords
There has been a constant increase in property price over the last number years, directly correlating with the increase in age of first-home buyers. This is an important point in the overall discussion as it directly aligns with our mission – Decrease the average age in first homeownership. As the price increases, so do all other costs associated with buying a property.
In conclusion, from a tenure perspective, Australia is an extremely hard market to purchase property in. Especially for a first home buyer! The real estate and land price increase directly affects the supply of the homes and units in Australia. Affordability post-covid, came down to a mixture of many households not being able to afford rent plus other costs, low interest rates and a lack of supply for owner occupiers in particular. This shows there is massive demand to purchase housing for those under 35 and therein lies a main problem, highlighting the issues of housing tenure and supply and demand among young Australians.