Young people are often cited as the biggest victims of skyrocketing home prices, but one age group hits harder than others.
There is a common thread running through most of the commentary on the housing market in Australia, that rising home prices are a good thing.
At first glance this doesn’t seem like a particularly controversial claim, after all. property prices Australia has been on the rise for more than a century and nearly two out of three homes are owned by property.
But when you begin to dig deeper and examine the impact families have on Australian society, it becomes clear that this has a very real cost. jump in property prices That most Australians pay in some form or the other.
Unexpected Collateral Damage – Retired
When one thinks about the effect of high property prices On society, it generally conjures up the image of a young couple attempting to buy their first home, yet retirees suffer increasingly collateral damage from past housing prices.
While on paper many of these property owners would be well-endowed in the multi-millionaire realm, in reality your home is worth a sizable amount, much less unless you are willing to sell and move it. Or more meaningless. in another house.
As of 2015, 12 percent of Australians over the age of 65 mortgage loan That compared to only 7 percent of households in that age demographic in 1990.
This figure is also likely to be distorted by households who withdraw part of their retirement as a lump sum to pay off some or all of their remaining mortgage after retirement.
According to research by Curtin University professor Rachel Ong Wiforje and RMIT University professor Gavin Wood, the level of mortgage debt retirees were taking into retirement as their percentage of income also increased significantly.
In 1990 the level of mortgage debt carried in retirement accounted for 72 percent of household income. By 2015, that figure had more than doubled to 152 percent of household income.
Still, retiring with Australian mortgage loans is not a legacy of today’s housing price boom or so, it is driven by mortgages taken years ago when prices were a fraction of what they are today.
first home buyer
In a recent ANZ CoreLogic Housing Affordability Report, it was revealed that it takes the average Australian household 10.8 years to save a deposit for a house by June 2021.
Sydney once again took the crown as the country’s most affordable capital, taking 16.6 years to save for a deposit for the average Sydney household.
Leaving aside the fact that if prices continue to rise at levels consistent with historical rates, it will be impossible for the average Sydney family to ever save for a deposit on an average-priced home, even Waiting 16 years to save also has big consequences for a deposit down the track.
According to A 2020 study conducted by Money.co.uk in 25 countriesOn average, Australians are 36 years old when they buy their first home.
With first home buyers increasingly taking out a 30-year mortgage to spread the high cost of the home over the maximum possible period, this leaves little room for error, hardship or life’s unexpected twists and turns.
Barring any major changes in Australian wage growth in the coming decades, this would increase the proportion of retirees who will retire with large amounts of mortgage debt.
But it is not the first home buyers in the capital who are struggling like in previous years. Working from home is becoming increasingly popular and many people are looking for a more affordable home, with property prices skyrocketing in regional Australia, with locals looking for a home for their families.
In regional NSW, it now takes the average household 11.7 years to save on a household deposit, compared to almost all capital cities in the country, with the notable exceptions of Sydney and Melbourne.
The idea that families could be relocated to areas on a larger scale for a lower cost of living has not been exposed to the reality of the post-pandemic.
Before the pandemic it provided a way out for thousands of Australians a year out of the high cost of living in the capitals. But as that number grew rapidly due to the pandemic, it spread the ever-increasing cost of housing that many were trying to avoid.
According to a study conducted by the International Monetary Fund, a 1 percent increase in GDP in household debt reduces inflation-adjusted growth by 0.25 percent after three years.
In fact, the more a nation’s households spend on repaying their debts, the less money is spent on consumption in businesses in the economy.
Australia’s domestic debt to GDP ratio is among the highest in the world with 123.4 percent of GDP. Based on the IMF’s findings and those of other organizations that echoed their findings, the country’s domestic debt is a significant strain on the economy.
While nearly two thirds of Australians benefit from rising housing prices through their home ownership, most arguably lose out in the form of weak economic outcomes that play a role in influencing everything from economic opportunities to wage growth. .
First home buyers may be the ones who bear the brunt of the very obvious symptoms of high housing prices in the here and now, but in the long run the data shows that many of us pay for it one way or another.
Tarrick Brooker is a freelance journalist and social commentator. @AvidCommentator