October 22nd 2024.
Australia is falling behind many other countries in terms of home ownership, with households having to take on more debt to afford a home compared to similar nations. A recent report from AMP reveals that less than two-thirds of Australians own their home outright or with a mortgage. This is slightly lower than countries like the United States, United Kingdom, and New Zealand, and significantly lower than European countries like Lithuania, Spain, and Italy. The issue of home ownership has become a growing concern, as seen in the case of a teen driver who was spared jail time after causing the death of a top cop's son.
According to AMP's deputy chief economist Diana Mousina, Australia's low home-ownership rates are evident when compared to other countries, especially those in ex-Soviet Europe. She also points out that owning a home is a common aspiration for people around the world. However, the reality for Australians is that buying a home has become increasingly difficult, as reflected in the record levels of household debt, which is currently at 214 per cent. This is double the amount in the United States and significantly higher than in countries like New Zealand, Canada, and the United Kingdom.
Mousina acknowledges the common belief that Australian homes have become unaffordable, and attributes this to the deterioration of affordability metrics. One of these metrics is the home price-to-income ratio, which has doubled since 2000 and is only surpassed by Canada among comparable countries. While this measure has decreased in the UK, US, New Zealand, and Canada, it continues to rise in Australia despite high interest rates and the cost of living. Mousina notes that Sydney is among the most expensive cities in the world, while Brisbane and Melbourne are not far behind.
One of the reasons for the affordability problem in Australia is the fact that 48 per cent of the population resides in just three capital cities. This means there are fewer affordable markets to choose from, making it harder for people to buy a home. Mousina admits that there are no quick fixes for this issue, but suggests increasing construction, reducing migration levels, and reviewing the country's tax system. This could involve changes to housing-specific taxes, such as replacing stamp duty with a land tax, limiting negative gearing, and reducing the capital gains tax discount. Ultimately, addressing the issue of home ownership in Australia will require a multifaceted approach.
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