Australia has a growing generation of residents who can not only not afford to buy, but cannot afford to rent, either. They’re the oft-forgotten ‘rental sector’ lost amid an abundance of market commentary devoted to the ‘good news’ on falling interest rates for mortgage holders, endless ‘forecasts’ of growth for potential property investors, and renovation mania that is set to hit the country once again as we enter the year’s annual ratings war full of obsessive real estate reality shows.
Despite reports assuring buyers that housing affordability has improved and the persistent and poorly assessed claim that it’s cheaper to buy than rent in an increasing number of suburbs, (the methodology of which I argue against here), the percentage of people requiring rental accommodation is fast gaining pace, and for the past five years or so, yields have been rising at phenomenal rates – by and large outpacing both wage growth and inflation for the same period.
The insistence from various commentators that the steep rise in rental prices will push increasing numbers back into ownership fails to consider that inflated yields coupled with erosion of interest on long-term deposit accounts has all but cancelled out any perceived benefit for a large proportion of ‘would-be owners’. Consequently, they often have no choice but to lodge with family or friends as they transition through the various stages of job changes and property moves.
Currently, roughly 30% of Australia’s housing market is made up of renters. The 2011 census data indicated median rises in rental prices rose sharply over the five-year interim, with Western Australia tipping the scales with an increase of 76% over the corresponding period.
The number of owner-occupiers has been slowly diminishing, and the proportion of renters priced out all together is increasing.
Australia’s owner-occupancy rate, which once sat at 71.4% in the mid to late 1990s, is now at 67% and forms part of a slow decline in which families with children in particular seem to be suffering. The decrease of ownership for this demographic has fallen from 79.5% (2006) to 77.2% in 2011 – and considering the low activity in the market of late, it’s fair to suggest the downward trend is set to continue.
Other reports presented late last year suggest that had ownership percentages stayed at the same level as that recorded in the 2006 census, we’d have welcomed an additional 34,000 into the property market. As it is, despite the 6.1% ‘peak to trough’ fall in the national median house price and flat prices in most capital city markets throughout 2012, sales turnover over the past two years has been woefully low – back at levels not seen since the late 1990s.
It’s easy to palm off the figures as a result of low consumer confidence, however as the latest Fitch ratings report on residential mortgages pointed out, Australia is still the “least affordable housing” worldwide – and it’s nothing to be proud of.