Why lower home ownership is worrisome

why lower home

Due to the surge in house prices, the rate of home ownership has also declined, with the most pronounced slump being seen in the hot property market of Sydney and Melbourne.

According to the latest instalment of the Household, Income and Labour Dynamics in Australia Survey (HILDA), the proportion of homeowner households in NSW has fallen steadily since 2001 to a historic low of 62.5 per cent. Victoria also fell to 66.1 per cent.

The low rate of home ownership can be a huge problem, especially for retiring Australians. The country’s retirement income system rests on an implicit assumption that most retirees own a home, so the fact that more retirees are now non-homeowners will put an additional pressure on the federal budget. The high cost of housing can also make people reach retirement age with an outstanding home loan, resulting in more old-age poverty.

It is also problematic for start-ups, as it is common for entrepreneurs to use the equity in a home as a collateral for loans to establish small businesses. Eventually, it can have adverse economic consequences given the important contribution small business make to the employment sector.

The decline in the rate of home ownership also widens the generational wealth gap, resulting in greater polarisation in the distribution of wealth in the future. Furthermore, it has changed the dynamics in the rental market, especially among younger people.

“They are pushing up rents in the private rental market to the detriment to a group that in days gone by would always have been in that private rental market,” said economist Sail Eslake. “It is, therefore, a cause of increasing rental stress for low income earners.”



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