Affordability no dent to property dreams

6 January 2020

CoreLogic has released the 2019 Perceptions of Housing Affordability report, delving into what Australians are thinking and feeling about property, and exploring their hopes and dreams.

In the past decade, there’s no doubt that Australians have found it harder to buy a home.

Affordability significantly worsened during the market’s growth phase that ran from early 2012 to mid-2017, when prices rose rapidly, particularly in Sydney and Melbourne.

But worsening affordability hasn’t dented the Great Australian Dream of owning our own property. As CoreLogic’s latest research reveals, even the youngest generation, who have faced the toughest time getting into the housing market, remain passionate about home ownership.

Here are some key findings from the report.

The Australian dream is still alive

Yes, affordability has deteriorated over recent years, but our drive and passion to own our own piece of Australia remains.

CoreLogic reports that more than four out of every five Australians believe it’s still important to own a home. And, in good news, just over half of Australians think affordability has improved over the last year, with falling house prices and record low interest rates easing affordability concerns.

But Tim Lawless, Research Director at CoreLogic, warned of complacency, as the Australian property market remains fundamentally unaffordable.

“Key affordability ratios show it is difficult for Australians to afford a home and repay a mortgage,” he said. “The recent gains in affordability could be quickly lost if the early trend towards higher prices is sustained.”

54%

think housing affordability has improved over the last year.

81%

believe home ownership is important.

83%

are concerned about being able to afford their first or next home.

Unholy trinity presents a challenge

Lisa Claes, CEO of CoreLogic International, explained that Australian’s are struggling with the “unholy trinity” of obstacles when buying a house.

“First, they must raise a deposit. Then gain approval for a loan, which has become tougher in the wake of increased prudential regulation and the Financial Services Royal Commission. And finally, they have to fund stamp duty,” she said.

“It’s not surprising, therefore, that while half of Australians thought affordability had improved, more than 80% are still concerned about being able to afford their first or next home.”

Top 3 obstacles to home ownership

#1

Saving for a deposit

#2

Loan approval

#3

Stamp duty

Cubby house syndrome worsens

The research found that the ongoing affordability crisis is entrenching a generation who are dependent on their parents for housing, with the number of Millennials giving up hope of moving out of home by 30 years of age surging.

“The ‘cubby house’ syndrome – where children are prolonging their home stay with parents – is intensifying,” Ms Claes said. “Our youngest generation is effectively being locked out of the market and are increasingly dependent on parents.

“If Millennials’ affordability disillusionment continues, we risk entrenching a generation who become disenfranchised from society. It raises serious issues around inter-generational equity and should be a catalyst for policy makers to address affordability at a foundational level.”

63%

of people living with their parents can’t afford to leave.

1 in 3

of those living at home say they’ll be 30 before they move out.

The ‘bank of Mum and Dad’ is an attractive option

Amid the ongoing housing affordability crisis, more Australians, particularly young people, are turning to family for help. In fact, a quarter of Millennials said family assistance to raise a deposit would be a great help when buying their first home.

“The ‘bank of Mum and Dad’ – where young people rely on their parents to support their entry into the housing market, either by helping with a deposit or assisting with loan repayments – is becoming one of the last sources of hope for Millennials,” Mr Lawless said.

Despite the challenges Millennials face, the great Australian dream of home ownership burns brightly.

“They haven’t given up – they want to own their own home,” Mr Lawless said. “In fact, by being denied it, they want it even more.”

Millennials

who struggle with affordability the most, are most passionate about home ownership.

¼

of Millennials said family assistance to raise a deposit would be great.

1 in 5

Millennials view financial support from their family to pay their mortgage favourably.

Stamp duty and concessions must be addressed

CoreLogic’s report found that across all generations, Australians are united in their growing opposition to stamp duty.

“Baby Boomers lead the growing opposition to stamp duty, with close to 9 out of 10 of them agreeing that reducing or removing stamp duty would improve housing affordability,” Mr Lawless said.

“This view is gathering momentum. The backlash against stamp duty is likely to continue given that the impost and inefficiency of stamp duty prevents many Australians from buying a home.”

The report also found there continues to be support for grants and concessions, but these needed to be viewed with caution.

“Boosts to the first home buyer grant and stamp duty concessions have had instant responses from first home buyers in the past,” Mr Lawless said. “But despite that popularity, grants and concessions have the potential to actually worsen affordability by stoking demand and pushing prices higher in the short term.”

79%

of Australians think removing stamp duty is the best strategy to improve affordability.

87%

of Baby Boomers support reducing or removing stamp duty.



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