From: Owen .
Sorry about that. I copied it below....
Great Aussie home dream: only half need apply
The passion for home ownership, a ballast of Australian society for the past half century and a perennial hot-button election issue, is on its way out.
Within a generation, home ownership is likely to fall from 69 per cent to as low as 50 per cent as it becomes less attractive to the young and mobile, unaffordable for the working poor and financially questionable to the investing class.
While the Federal Government moved last week to kick-start the housing industry by boosting first home-buyer grants, bigger changes are afoot and they are challenging the central role of home ownership in Australia's economy.
The drift away from the Australian dream won't necessarily affect property prices in the short term, but in the longer term it will reconfigure the cornerstone of household wealth - the rock on which families were planned, retirements were funded and government policy was formulated.
The latest report from the Australian Housing and Urban Research Institute shows home ownership for the poorer half of society is becoming less affordable, despite the economic prosperity of the past few years and lower interest rates.
The study, Falling Out of Home Ownership, attempted to find three-bedroom houses in Sydney, Melbourne and Adelaide affordable for tenants in the bottom 40 per cent of household incomes - roughly $32,000 a year.
According to an institute director, Mike Berry, "none could afford a three-bedroom house anywhere in the cities, unless they paid more than 30 per cent of their income on mortgage repayments and, in Sydney, they couldn't afford a small flat". (The cheapest 3- bedroom house for sale in Sydney last week, for $104,950 in western suburb St Marys, is priced $14,000 above what they could afford.)
The barrier to home entry, especially in major cities, is reflected in the blowout of long-term renters. Among private tenants, half have been renting for more than 10 years.
It is also obvious in an analysis of who is taking out mortgages. From 1986 to 1996, the proportion of under 35 year olds with a mortgage fell by 25 per cent which, according to Berry, indicates either a significant delaying in home ownership or a move away from it.
Indeed, patterns of home ownership are being shaped by two disparate groups - the working poor who can no longer afford to buy in the cities where they work, and the young, relatively affluent professionals who can't afford to buy where they want to live or don't want to make the lifestyle sacrifices.
There is also a small cohort who, according to the chairman of IBIS Research, Phil Ruthven, have done their sums and decided that investing in the share market is a better bet than bricks and mortar.
The shift in who's holding the deeds has been documented by associate professor of economics at Sydney University, Judy Yates.
Between 1976 and 1996, only two segments of society increased home ownership rates - wealthy couples with children and single women. The biggest declines in ownership were among couples 35 to 44 years old with dependents, dropping 10 to 15 per cent, and DINKs (dual incomes, no children), with a smaller decline.
The result, says Yates, "is an increase in the number of people owning their homes outright [the boomers and their parents paying off mortgages] but a lowering in the number of people entering the home ownership market".
The demographics affecting home ownership, says Berry, are many.
Divorce, later family formation, more single person households and fewer children in families all undermine the drive for home ownership.
But it's the changes in work patterns, especially the fact that 28 per cent of workers are now part-timers, that most undermine the move into long-term debt.
"Among young people, renting has more to do with changes in the job market - the lack of security, lack of full-time work and increased mobility," Berry says.
The lack of affordability is partly responsible for the economic migration patterns across the country - the upwardly mobile move into central Sydney and Melbourne while the welfare poor and working poor are pushed out to coastal towns and minor cities.
While home ownership follows the polarisation of society, with more people owning more than one property and more owning none, there are significant lifestyle choices being made about housing.
A quarter of households are now single person households (up from the historical 8 to 11 per cent). In inner city suburbs such as Melbourne's Carlton and Southbank, 60 per cent of residents are single and it is these people who are most likely to rent. In Southbank, 73.5 per cent of housing is rental (compared with the Melbourne average of 21 per cent). These inner city areas are also the home of the mobile. In St Kilda, 28 per cent of residents moved home in the last five years.
This single, mobile lifestyle was once the precursor to family life but for many more, it's now life.
"Pedestrian is probably the right term for it," says IBIS's Phil Ruthven, when asked whether Australia's home ownership tradition owed more to a sense of place or a pedestrian outlook on life.
"We're less frightened now. Our post-war high ownership rates were born out of fear. For those who went through the depression and the war, home ownership offered crucial security."
Freed from the bricks and mortar mentality, Ruthven says more are becoming aware that share investments have outperformed home ownership "for every decade of the past century". The only exception to this was property in inner suburban Sydney.
Meriton's development manager, David Hynes, finds many of these attitudes among the buyers and tenants of the group's inner-city apartments. "The majority of our buyers are small investors, mostly in the baby boomer generation, who are asset-rich, will often buy more than one property and don't mind using their home as equity."
The majority of the tenants of these investment properties, he says, are the grown-up children of the boomer generation, who are in no hurry to leave the apartments.
"There's no great incentive for them to move onto home ownership. They are in quality accommodation, with a pool, gym, parking; they have city views and cafes outside the door. They're happy to remain long-term renters and invest whatever money they have in the share market. A lot of people are very rational about it these days. That passion for home ownership just isn't there."
Financial advice that promotes share market investment over home ownership supposes that people will invest what they would have devoted to a mortgage.
It also exposes people to the vagaries of a rental market that considers tenants as short-term users or long-term desperates.
Ruthven, a lessor, concedes that our rental industry is unattractive to most. The future for long-term renters, he believes is the development of the leasing market, which comprises only 1.5 to 2 per cent of the total residential rental market.
Leasing, he says, offers longer tenure, with at least two to five-year contracts; it also offers tenants the opportunity to modify the residences and sub-let them, if required.
The curious aspect about these changes in who owns Australia's homes is that none of the broad housing indicators have picked them up.
Activity in mortgage financing no longer reflects home-buying patterns, but rather churning in the mortgage market as more people refinance or use mortgages to buy consumer products.
The housing affordability index reflects the average but "disguises the distributional effects, especially what's happening at the lower end of the market," according to Berry.
And even the home ownership ratio is propped up by the presence of the two post-war generations, the boomers and their parents - 88 per cent of whom entered home ownership with the majority still holding the deeds to the home.
The generational nature of home ownership means change happens at a glacial pace. Predicting what level home ownership will settle at is not easy.
Ruthven says it will come down from a historic high of 72 per cent to about 50 per cent by 2045.
Berry and Yates believe it will settle at about 60 per cent. Real estate agents confirm this impression.
When The Australian Financial Review mimicked the Australian Housing and Urban Research Institute's search for a three- bedroom house affordable for half of Australia's tenants, the trek took us through some of the poorest areas in Sydney.
Without prompting, the agents spoke of houses 'barely livable', 'in a rough area', 'not one you'd want to buy and rush into'.
There was a presumption that while these properties were too expensive for half the tenants in Australia, there were any number of investors prepared to buy sight-unseen and then put a "desperate" tenant in while they waited for the capital appreciation.
Inspection was not recommended.
Berry says governments have yet to come to terms with the impact of changing home ownership on "wealth formation, employment, levels of crime and family formation".
And, while today's younger generations prefer to remain footloose and mortgage free, those same renters may not want to remain rootless and landlord-locked in their old age.
Yates says the impact on retirees fifty years down the line will be huge. "What happens if, in the future, only 60 or 70 per cent of retired people own their own home compared with the present 90 per cent of retirees?" she asks.
"How do we support them, especially if the pension is being wound back as most expect it to be?"