The decline in house prices caused by the COVID-19 shutdown of the economy is not likely to see a meaningful increase in home ownership, new research has revealed.
The Australian Housing and Urban Research Institute (AHURI) showed that current high home ownership is masking a longer-term problem, with most of the western world falling into the same trap.
An important finding in the present COVID-19 context is that crises such as the global financial crisis (GFC), which produced major falls in dwelling prices in many countries (less so Australia), did not create a return to ownership.
“Fiscal austerity, lack of finance, weakened household income, purchasers being outbid by investors for available finance meant ownership in most western countries fell sharply after the GFC rather than increased,” said lead researcher Professor Terry Burke of the Swinburne University of Technology.
“Broadly, Australia now has an institutional environment which no longer supports ownership as it did in the past,” Professor Burke said.
“This means the housing system will become more inequitable irrespective of what incremental housing policy reforms are made. Given this, we have to rethink what sort of housing system is appropriate for Australia’s future.
“Either we embrace fundamental and broad-based reforms to rebuild ownership or we accept a retreat from its historical dominance, moving to a system which has more balance between rental and ownership – what we can call a dual tenure system.”
While Australia’s overall home ownership rate appears to have held up well – it was 68 per cent in 1976 and 67 per cent in 2016 – the rate is projected to decline to around 63 per cent for all households by 2040, and to 51 per cent for households in the 25-55 age bracket, down from 60 per cent in 1981.
“A housing system in which one half (predominantly older home owners) acquires wealth and the other half (generally younger renters) doesn’t is a recipe for long-term social problems,” said Professor Burke.
The research suggests that while no single policy failure, single political decision or single market or state failure has eroded the ability to achieve the ownership dream, the change has come from complex shifts throughout the entire institutional environment.