Slow burn: The changing profile of low-moderate income home purchasers in Australia

The decline in home ownership rates in New Zealand has been well documented. In Australia, however, there has not been any remarkable change in rates despite substantial economic and social changes since the early 1980s, but by examining changes within the population of home purchasers, comparing 1981-82 and 2007-08, we can identify some important and potentially worrying trends of social and policy significance. The lag effect associated with home ownership as households repay mortgages over 25 years or more means those small changes discernible in any one year may compound over time to produce significant changes in patterns of home ownership in Australia. The paper reports on a detailed examination of home ownership, household income and household type using data from the Australian Bureau of Statistics Survey of Income and Housing 1981-82 and 2007 08. The paper outlines the quite different household income and household type profiles of outright owners and home purchasers comparing 1981-82 and 2007-08. When we look specifically at the income profile of low-moderate income home purchasers (lowest 40% of all purchaser households), we find that the threshold income for purchase has increased and that rates of purchase have been sustained through large mortgages with repayments which exceed established affordability benchmarks, particularly in the case of recent purchasers. It also appears that families with children have been squeezed out of the home purchase market due to their higher living expenses compared to single and couple households. Finally, many purchasers face repaying loans at a later age, which may not be a problem for some households in view of policies to encourage people to work for longer, but others will face the problem of having a mortgage as their income earning potential declines and even into retirement.