The Dwindling Australian Dream: Home Ownership Beyond Reach?

1

The situation is more dire for median-income renters, who find that they could compete for just 11% of homes sold last year, and an even narrower 9% for standalone houses. This limited access forces many to reconsider traditional homeownership as a viable option.

Surveys are underscoring this crisis. An Accent Research poll revealed a significant gap between aspiration and reality, with only 15% of participants confident that young Australians can secure home ownership without substantial financial support from external sources such as family.

The hurdles to entering the housing market don't end here. Analysis from Money.com.au demonstrated that the journey of amassing a deposit has become more onerous than ever for first-time buyers, who now face the daunting prospect of taking out hefty mortgages for homes that might previously have seemed modest.

Reflecting these financial strains, the average size of owner-occupier mortgages for first-home buyers ballooned to a historic high of $538,200 as of September 2023. This surge represents not just increasing home prices but a shift in expectations and financial commitment needed just to step onto the property ladder.

Adding a historical perspective to this discussion, independent economist Tarric Brooker shared a comparison on social media. His chart contrasted the stark change in housing affordability between 1998 and now. Back in 1998, armed with an average full-time income, Australian households could afford homes virtually everywhere except Sydney.

Examining this longitudinal data—sourced from benchmark rates in 1998 and present-day rates, albeit currently lower than benchmark rates—emphasizes the affordability decline, now with Darwin being the occasional outlier.

Delving deeper into historical patterns, housing affordability actually showed more strain in 2022 compared to pre-1998 levels, even before the Reserve Bank of Australia embarked on its current cycle of monetary tightening. This insight challenges perceptions and encourages reflection on any symmetry between historical and current affordability conditions.

Today's scenario is further complicated by elevated mortgage repayments reflecting a steep rise compared to interest rates touching as high as 17% in the 1990s. This comparative data begs reflection on how consumer expectations and economic realities shape the housing landscape.

Alex Joiner from IFM Investors contributed further historical analysis by demonstrating that mortgage repayments as a portion of income slightly outpaced these present figures in 1989-90, prompting considerations around economic adaptability and inflation-adjusted incomes.

Joiner poignantly remarked, "It will be a story we will tell children in future that there was once a time in Australia when a one income household (or individual) could buy a house" on Twitter. This sentiment encapsulates the gulf between past and current generational experiences.

The original article from PropTrack highlighted these economic divides which stress a narrative of a once egalitarian Australia, increasingly drifting towards disparities tied to class. Intergenerational wealth transfer, rather than earned income, now often defines home ownership possibilities in Australia, significantly altering the modern perception of the Australian Dream.

Published:Wednesday, 6th Nov 2024
Source: Paige Estritori

Share this news item:

Finance News

Overheads on Enhanced Vetting Could Ratchet Up Wholesale Fund Costs 07 Nov 2024: Paige Estritori The prospect of intensified scrutiny in confirming wholesale investor status could potentially tip the balance of competitiveness away from wholesale funds. According to recent commentary from the Financial Services Council (FSC), implementing added verification processes might impact these funds' ability to compete effectively. - read more

RBA Chief Under Fire: Decision on Rate Cuts in the Spotlight 07 Nov 2024: Paige Estritori Reserve Bank of Australia (RBA) Governor Michele Bullock is set to face intense scrutiny over the central bank's conservative approach to cutting interest rates, as apprehensions about inflation persist in Australia. During a regular parliamentary session, Bullock’s policies will draw pointed questions from lawmakers. - read more

The Dwindling Australian Dream: Home Ownership Beyond Reach? 06 Nov 2024: Paige Estritori Recent insights from PropTrack have painted a bleak picture of Australian housing affordability, reaching unprecedented lows. In a market where a typical household makes just over $112,000 annually, a mere 14% of homes sold are within their budget. This dwindling accessibility starkly highlights the challenges for would-be homeowners today. - read more

CFS Launches New Advisory Initiative with Viridian 05 Nov 2024: Paige Estritori Colonial First State (CFS) is reshaping personal finance support by engaging with Viridian Advisory. This initiative aims to aid FirstChoice superannuation, pension, and investment members seeking guidance without ongoing financial advisement. The collaboration brings a novel approach to receive one-time, topic-focused advice tailored to individual needs. - read more

NSW Takes Decisive Steps Against Unlawful Merchant Fee Practices 04 Nov 2024: Paige Estritori The New South Wales (NSW) Government is taking robust measures to rectify years of unlawful merchant fee surcharges on customer transactions. Despite ongoing legal concerns, these fees persisted for nearly a decade, a legacy of policy directives laid out by the former Liberal-National government. - read more

Decoding Trust in AI for Finance: A New Path Forward 04 Nov 2024: Paige Estritori As artificial intelligence becomes entrenched in the financial industry, a critical question arises: Do people trust AI for making financial decisions? Exploring this query reveals diverse attitudes depending on individual backgrounds and familiarity with AI technologies. - read more