The trend in Australian housing over the past 10 years looks pretty grim.
The Australian Bureau of Statistics put out a special this week on housing occupancy and costs. The ideal of getting a home early, raising a family and slowly paying it off, and retiring with it wholly owned is being achieved by fewer Australians.
The survey was done between 1994-95 and 2003-04 – roughly since the Howard Government took over. But we must bear in mind that Labor was in office in all or nearly all the states during this time and housing is mostly a state matter.
You would think that with a booming economy, the housing position would have improved. Not so – on nearly all measures: a lot more more private renters; slightly fewer public renters; a major fall in outright owners; fewer people per dwelling; housing costs rising by more than CPI or wages; greater difficulty for first-home buyers.
In 2003-04 Australia had 19.6 million people living in households, up 11 per cent on 1994-95. But the number of households increased by 18 per cent to 7.7 million households. It is a disturbing trend because the average number of people per household is falling. More people are living alone.
The number of people owning outright has fallen from 42 per cent to 35 per cent. Private renters went from 18 to 21.
The worst figure was the increase in costs. They went up a whopping 29 per cent after allowing for inflation. Canberra is now the second most costly city for housing, after Sydney.
So it is too smug for us to imagine that the housing boom has made us wealthy. For many it has made them much poorer as they struggle to pay higher mortgages and higher rent. Via the lending institutions, Australia has sucked in a huge amount of foreign money to fuel the boom. Those who got in early may be laughing, but overall is has left the society less equal and imposed a burden on those least able to afford it.
Housing costs actually fell for householders without a mortgage. Most likely this is because people have reduced water and electricity consumption and rates have hardly kept up with inflation as councils allow infrastructure to decay.
The big cost increases are servicing mortgages and rising rents that are based on the landlord’s mortgage costs. The mortgages are higher because the value of the dwellings the mortgages were used to buy went up by a whopping 70 per cent.
At least some of the extra cost has been unnecessary because people are buying or building houses with more bedrooms than they need. More than three quarters (77 per cent) of households had more bedrooms than were needed. Only 3 per cent had too few bedrooms. It may be that high stamp duty deters people from moving to a more suitable dwelling.
Maybe aspiration (or greed) encourages people to have an over-sized dwelling. The same aspiration (or greed) might be part of the cause for the number of households to rise at a higher rate than population as people buy more than one dwelling.
Certainly there are more owners of dwellings for investment. This has been built on people being able to use the rising value of their home to raise funds for the purchase of investment property. Again, it is a case of the housing boom shutting some people out of owning their home and on to the rent market.
First home-buyers have been badly affected. In normal times they make up 20 per cent of new housing loans. That figure fell to just 2.5 per cent at the height of the boom in 2004. Oddly enough, their plight was made worse by the first-home buyers grant when the Federal Government increased the grant to $14,000 as an election ploy in March 2001. First-home buyers surged into the market, hitting a high of 28 per cent of new housing loans.
Alas, the grant set off a frenzy of demand and prices shot up, thereby shutting out future first home-buyers. The portion has never recovered to its historic level.
It would be nice to know what advice the government had about the effect of increasing the grant. It would not be surprising if it had been warned but it went ahead in its mad vote buying anyway. We may never know because Treasurer Peter Costello has issued a “conclusive” certificate that the advice is not to be released under the Freedom of Information Act because its release would deter bureaucrats from giving fearless in the future. Tripe. The real reason is that the government does not want to be embarrassed.
Anyway, The Australian newspaper is challenging the certificate in the courts.
In all, the sound economic policy of the Howard Government has helped increase prosperity overall, but in housing it has come at the considerable price of much higher housing costs and more people being shut out of the Australian dream.