Australia lags behind much of the world when it comes to home ownership, and households are taking on far more debt to buy a house than in other similar nations.
Less than two-thirds of Australians (63 per cent) own their home outright or with a mortgage, according to a new report from AMP.
That’s slightly less than in a raft of comparable nations, including the United States (66 per cent), the United Kingdom (67 per cent) and New Zealand (65 per cent), and well behind some European countries such as Lithuania (92 per cent), Spain (75 per cent) and Italy (72 per cent).
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“Home-ownership rates around the world shows us that Australia… is on the low end of the spectrum, especially compared to ex-Soviet European countries,” AMP deputy chief economist Diana Mousina said.
“High global home ownership rates indicate that it’s an aspiration of most people to own their own property.”
Just how difficult it is for Australians to buy a home is borne out by record levels of household debt, which currently sits at about 214 per cent – roughly double that of the US at 110 per cent, and far higher than New Zealand, Canada and the UK.
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“The common belief that Australian homes have become unaffordable is understandable,” Mousina said.
“All the metrics around affordability have deteriorated.”
One of those metrics is the home price-to-income ratio.
Australia’s is currently sitting at 9.6, according to AMP, roughly double what it was in 2000, and lagging behind only Canada of the comparable countries.
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But while the measure has declined in recent years in the UK, US, New Zealand and Canada, in Australia it’s been rising despite high interest rates and the cost-of-living crisis, driven by soaring capital city prices.
“Sydney ranks among some of the most expensive cities in the world (with a price-to-income ratio of 12.8),” Mousina wrote.
“And Brisbane and Melbourne are not far behind…
“The problem for Australia is that 48 per cent of the population reside in just three capital cities (of Sydney, Melbourne and Brisbane) which arguably makes the affordability problem worse in Australia, because there are less affordable markets to pick from.”
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She cautioned that there are no quick fixes for housing affordability, but that drastically ramping up construction, cutting back on migration levels, and a review of Australia’s tax system.
“(That should include) potential changes to housing-specific taxes like replacing stamp duty with a land tax, limiting negative gearing and reducing the capital gains tax discount,” Mousina said.
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