Australia’s home ownership rate is falling, as imbalances in demand and supply push house prices above what many singles and lower-income households can afford.
According to a new report from the Grattan Institute, real house prices grew by an average of 4.3% a year between 1995 and 2012, far outstripping growth in household incomes.
Economist Saul Eslake told a Melbourne economic conference last month that the average number of people living in each house had grown for the first time in 100 years, suggesting that 20- and 30-something-year-olds were taking longer to move out of their baby boomer parents’ homes.
The institute notes this week that home ownership rates have been propped up by older households, with home ownership rates falling among the under-45 age groups.
The Government provides some $36 billion a year in benefits – such as tax exemptions – for homeowners, and $7 billion a year for residential property investors, the institute reports.
Private renters – who account for nearly one in four households – receive “very little support through the tax and welfare system”, and additional costs like stamp duty are exacerbating the divide between the rich and poor.
“There are many good financial, social and personal reasons for people to buy housing,” the institute reports.
“Despite the huge amounts government spend on subsidising home owners, aggregate ownership rates appear to have been more or less stable for decades, and are now declining slightly.
“Help for first home buyers has had negligible impact, besides pushing up prices and therefore benefiting sellers not buyers. Negative gearing and capital gains tax provisions mean that more assistance from government is available for buying second or third homes than exists for the first.
“These policies work to the greatest benefit of the already wealthy, while access to home ownership is harder than it has been for decades.“
According to the report, here’s what’s happening:
The Grattan Institute recommends that the government consider replacing stamp duty with a broad-based annual property tax, reforming tax incentives for property investment, and reforming the private rental sector to improve conditions for tenants.
There’s more in the report.
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