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‘I can’t afford to leave home’ – an increasing reality in modern Australia

As the Census approaches on 9 August, the latest edition of Melbourne University’s longitudinal survey of Household, Income and Labour Dynamics in Australia (HILDA), has been released, showing widening income inequality that is, according to its author, resulting in an ever-decreasing proportion of Australians owning their own homes. Although all of the implications are not immediately clear, the detailed survey of over 17,000 Australians provides some pointers about the trajectory of Australia’s housing mix that are rarely discussed and in many respects, hard to ignore.

Repeatedly, debate in Australia about housing is about the expense of free-standing dwellings and how prices have and are continuing to rise. This is a legitimate debate of course, but it is the rise in house prices, relative to median incomes, that is most important in the ‘home ownership’ debate.

The HILDA author, Professor Roger Wilkins from Melbourne University said in an interview with ABC News, that:

“We’re very soon going to have less than 50 per cent of adults who are home owners on current trends.”

He also commented that there is a widening generational divide, with younger generations seeing their median household wealth declining, while those for older Australians have been growing. This is displayed in the following chart* providing details for 25 to 34 year olds.

fig4

Inevitably, especially when coupled with growing house prices, declining median household wealth flows through to the capacity of a family or household to purchase a home. Known as housing affordability, analysing the median house price at the 10th percentile as a ratio of the median household income at the same 10th percentile shows that since 2001, owning a home has become significantly more challenging.

In 2001, the 10th percentile house price was 8.2 times 10th percentile income to 12.4 times in 2014, having passed through 14.0 times just prior to the GFC. The chart below provides the details.

fig5

As Greg Jericho points out in his analysis published in The Guardian online on 21st July, Australia’s median household income growth compares well with the USA over the period since 2001. The chart below shows the details of the comparison, but it also shows, as does the chart further down, that median household incomes have essentially flat-lined since 2009.

fig6

 

fig7

It is this stagnation in median household disposable incomes that plays most strongly into all considerations of inequality, especially with respect to what have been continually and strongly growing housing prices.

What the median income data in HILDA provides is evidence of yet another driver for the investor-fuelled emphasis on apartment developments. The simple fact might be that whether as an owner or a renter, increasingly, an apartment is all that most Australians can afford. For those whose livelihood is directly linked more to the free-standing dwelling market and its future, that may be a sobering thought if the trend continues.

Link to access the HILDA report can be found at 

https://www.melbourneinstitute.com/hilda/Reports/statreport.html

 

* Please note the charts in this item were originally published in The Guardian online

 

Posted Date: August 5, 2016

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