The Australian dream of home ownership is slipping away, leaving a threat of a US-style collapse in house prices, according to a team of university researchers.
Analysis by researchers from South Australia’s Flinders University has revealed home ownership in the 10 years from 1996 rose only 0.8 per cent despite strong economic growth and low interest rates in that period.
The Flinders Institute for Housing, Urban and Regional Research analysis found home ownership fell by 15 per cent over the two decades to 2006 for low income earners over 45 years of age and medium-high income earners under 45 years.
Other findings included large gains in national income from the resources boom were “wasted” by increasing house prices and accumulating debt to unreasonable levels.
The analysis found the first home owners scheme boosted home purchases for people under 25 years of age but many lower income earners in the 25-44 age bracket were unlikely to ever own their own homes because their parents were spending their inheritances and prices remained high.
Dr Joe Flood, the institute’s adjunct professor, said the “the writing is on the wall for the ‘Australian dream’.”
“The country that promised limitless land, cheap housing and near universal home ownership to all comers now has the most expensive housing in the world amid very tight housing and land markets and little prospect of restoring the balance,” Dr Flood said in a statement on Monday.
“As long as the government, the public and the media remain in denial, and self-congratulatory rhetoric continues that Australia has cleverly avoided the housing market correction it needed to have, there is little chance that matters will improve.
“The only ways that this would happen are through a US-style price collapse or a complete re-evaluation of the situation and a coordinated effort by governments, planning and financial institutions to restore the balance between housing supply and demand – or tax away the imbalance – so that all Australians may benefit.”
Dr Flood and his team assessed Census data to conclude that Australia’s housing market is in “a very dangerous and unstable situation which has received little adverse attention”.
The researchers found that after 1996, average house prices increased by three times on average – to around 6.8 times medium household income – and debt levels surged.
“On the one hand Australia is vulnerable to a collapse like the United States, where prices fell by a half during the sub-prime collapse … or to a long slow decline as in Japan since 1988,” Dr Flood said.