Falling home ownership. Rising debts. Things are looking grim for under-40s.

Cross-posted from The Conversation:

Home ownership among young people is declining, as mortgage debt almost doubles for the same age group, results from the Household Income and Labour Dynamics in Australia (HILDA) survey show. It also shows young people are living with their parents longer.

The Melbourne Institute of Applied Economic and Social Research undertakes the survey every year. It’s Australia’s only nationally representative household longitudinal study, and has followed the same individuals and households since 2001.

The survey shows the rate of home ownership among 18 to 39 year olds declined from 36% in 2002 to 25% in 2014. In the same age group, the decline in home ownership has been largest for families with dependent children, falling from 56% to 39%.

Even for those in this group who manage to buy a home, mortgage debt has risen dramatically. In 2002, 89% of home owners in this age range had mortgage debt. By 2014 this had risen to 94%.

More significantly, the average home debt rose considerably. Expressed in December 2015 prices, average home debt grew from about A$169,000 in 2002 to about A$337,000 in 2014. Low interest rates since the global financial crisis have meant mortgage repayments for these home owners have remained manageable, but this group is very vulnerable to rate rises.

Detailed wealth data in the survey, collected every four years since 2002, show this increase in debt and decrease in ownership are part of a trend in the wider population. HILDA shows 65% of households were in owner-occupied dwellings in 2015, down from 69% in 2001.

In fact, the decline in home ownership has been greater than the decline in owner-occupied households. This is largely because adult children are living with their parents for longer.

For example, the HILDA data show that the proportion of women aged 22 to 25 living with their parents rose from 28% in 2001 to 48% in 2015. For men this proportion rose from 42% to 60%.

Among those who manage to access the housing market, the data shows that the growth in home debt is not simply because they are borrowing more to purchase their home. A surprisingly high proportion of young home owners (between 30% and 40%) actually increase their debt from one year to the next, despite most of them remaining in the same home. Even over a four-year period – for example, from 2010 to 2014 – at least 40% of young home owners with a mortgage increase their nominal home debt.

The proportion of people with home debt that exceeds the value of their home – that is, negative equity – has also risen. In 2002, 2.4% of people had negative equity in their home; in 2014, 3.9% had negative equity. This is a relatively small proportion, but this could change as even small decreases in house prices will result in substantial increases in the prevalence of negative equity.

How this changes with location, income and profession

In 2014, less than 20% of Sydneysiders aged 18 to 39 were home owners, compared with 36% or more in the ACT, urban Northern Territory and non-urban regions of Australia. To a significant extent this reflects differences across regions in house prices.

Sydney and Melbourne have particularly high house prices, while non-urban areas generally have comparatively low house prices. Regional differences in the incomes of 18 to 39 year olds also play a role.

Those with the highest home-ownership rates are professionals and, to a lesser extent, managers. They experienced relatively little decline in home ownership.

For workers in other occupations, home ownership has declined substantially. In 2014 home ownership was especially rare among community and personal services workers, sales workers and labourers.

This decline represents profound social change among this age group, where renting is increasingly becoming the dominant form of housing. In 2002, 61% of people aged 35 to 39 were home owners – a clear majority of their age group. By 2014, this proportion had fallen to 48%.

The changing housing situation of young adults is part of a broader change in the distribution of wealth in Australia. The HILDA Survey shows that differences in average wealth by age have grown since 2002. For example, in 2002, median net wealth of those aged 65 and over was 2.8 times that of people aged 25 to 34. In 2014, this ratio had increased to 4.5.

The decline in home ownership among young adults and this broader trend in wealth have implications for their long-term economic wellbeing and indeed for the retirement income system. Even if house price growth moderates and many of those currently aged under 40 ultimately enter the housing market, it’s likely that a rising proportion will not have paid off the mortgage by the time they retire. It may be that many will resort to drawing on superannuation balances to repay home loans, in turn increasing demands on the Age Pension.

Article by Roger Wilkins, Professorial Research Fellow and Deputy Director (Research), HILDA Survey, Melbourne Institute of Applied Economic and Social Research, University of Melbourne


      • 1. Find asset rich lonely cougar to develop a relationship with
        2. Cohabitate and become financially dependent on rich cougar.
        3. Marry or maintain de facto relationship.
        4. Divorce or end relationship
        5. Utilise family court in order to obtain free assets at the expense of asset rich cougar
        6. Rinse and repeat your way to financial freedom

      • @ric Are there male cougars? I ask because that’s what my first wife did to me and the husband after me, and I suspect we’re not alone. She now lives in the house that me and the other guy have paid for with our child support. At one time I was paying something like $35K+ pa in support, down now to about $11K pa. And my last day of support payments is on 8-Nov next year, after 16 years of being ripped off byt the system.

        Of course, it can go pear shaped. Husband number 2 lost his job, and she’s now paying him child support, to her unmitigated fury and my glee.

      • @LSWCHP I think the general name for the male counterpart is “sugar daddy”.

        Oh – and love the last paragraph – that’s a right royal *f*ck you, b*tch!” …

      • 6. Rinse and repeat your way to financial freedom

        Likely a feasible strategy only until you’re 25 or so, has your window of opportunity closed ?

      • @LSWCHP I’d go with Silver Fox
        @Ino Sugar Daddy’s counterpart would be Sugar Mama I believe. They know they’re trading money for it. Silver Fox and Cougar don’t realise it.

      • “Likely a feasible strategy only until you’re 25 or so, has your window of opportunity closed ?”

        Nah, the strategy seems to work well beyond the age of 25 for females willing to spread their legs. Personally though as I am willing to make my own success in life I much prefer lamb over mutton.

      • @jwonga
        > “cougar/silverfox” vs “sugar daddy/sugar mamma” …
        Bloody ‘ell – an entire hierarchical ecosystem out there I was not aware of… f*ckin sheltered life I’ve had! *crawls under rock*

        >Personally though as I am willing to make my own success in life I much prefer lamb over mutton.
        And I prefer mares over sheep… Oh… wait… you weren’t talking about *that*, were you?
        and by *that* I meant “riding”… uh… riding… *cough*

      • @LSWCHP: well fuck me dead, looks like you’re another fine example of the oppressive patriarchy in action. /sarc.

        I’ll raise a beer when you’re free mate.

      • “”1. Find asset rich lonely cougar to develop a relationship with
        2. Cohabitate and become financially dependent on rich cougar.
        3. Marry or maintain de facto relationship.
        4. Divorce or end relationship
        5. Utilise family court in order to obtain free assets at the expense of asset rich cougar
        6. Rinse and repeat your way to financial freedom””

        Good idea … in theory.
        Unlikely to work though as it is a woman’s nature to “trade up” to a man with MORE assets than her.

        Unless you are prepared to settle for a lady that is mid 60’s and beyond and has run out of options.
        Even then, there is a good chance that she will either outlive you or you will want to end your own life as a result of making a bargain with the devil.

      • Well for starters my plan is influenced by: mild colonial = mild colonial girl (loosely speaking) so the six point plan, although well thought out, won’t work for me.

  1. But but …… macroprudential?

    And ummm.. I heard that house price growth is “slowing” so it’s all good? Like from 15 per cent a year to 10 per cent a year. That’s good right?

    Oh well …. better lower teh rates to improve affordability.

    • The bastards had better stay away from Canberra. It’s impossible to afford a house here as it is, without prices going Sydney-ish.

      Bring on the crash. We need some Canadian house price action, and we need it now.

    • Well I’ve been looking at Adelaide on and off, even Hobart. But just not sure I’ll find much work in either city. But I keep telling my partner if this Price growth in Melbourne continues there is no way I’m living there. Even if it is home. I’m so angry about the situation I’d rather leave Australia and move elsewhere.

  2. If there is a loan against the property, are they really “homeowners”, or just “mortgagors”? Why not the distinction?

    “A surprisingly high proportion of young home owners (between 30% and 40%) actually increase their debt from one year to the next, despite most of them remaining in the same home.”… If I have a mortgage, do I own the property, or does the property own me?

    • Jumping jack flash

      Its a matter of perspective and how you like to sell yourself to your friends at BBQs or around the water cooler at work.

      “I own a 2m property in Sydney” sounds so much better than “I’ve paid 10% of a 2m property in Sydney and I hope like hell I can keep employed at this income level for the next 30 years so I can pay the rest and still eat”.

      Or you can still flip to a foreigner for the near future I suppose if things go sour.

      Meanwhile, whoever you bought the house from is instantly 2m richer and doesn’t need to worry about the house you just bought, or paying back the debt you took on to give to them.

      Its a marvellous system for the winners.

    • Could argue renting from the bank gives you much greater security of tenure, not to mention the ability to change the place to suit your own tastes. Though with million dollar price tags in Sydney even this is becoming impossible.

  3. All good, get rich parents or a job that pays handsome money. Stop complaining and make it happen!

    • Oh, and before we get toooooo excited here’s a wet blanket from RBA on the very matter of wage increases…

      I bet Lowe said to the board “Hahaha… guys, guys, wait… here – someone – hold my beer and watch this: (speaking into the microphone) “I think workers should raise up and demand pay increases…pff*click*” *fft roaring with laughter*

      • Jumping jack flash

        yes, I tried thumping the table, cited my wins over the past year, my increase in skills, asked for 5%, and got 2%.
        At least it was something, even if it was less than CPI. *sigh*

    • Jumping jack flash

      yes you’re right.
      Set yourself up with rich parents, and if that doesn’t work (lol) get skills and work, either directly, or provide services to, a company that participates in an oligopoly for provision of essential resources for living, and gouges the crap out of it.

    • Mining BoganMEMBER

      Perhaps we could exclude the under 40s from any future survey. They’re not really trying are they? Or even go the the whole hog and exclude them from the census. Kind of a reverse Logan’s Run scenario.

      • >(…) Kind of a reverse Logan’s Run scenario.

        I think I saw that a while ago… there was this dude driving against the oncoming traffic on Logan Motorway one day… 😛

  4. Probably see constitutional challenge in 15 years and they’ll recover the stolen 1.5 decade earnings / interest. CIYA

  5. bolstroodMEMBER

    Big Australia is on a tear. I no longer believe that the bubble will burst.
    There is no political will to reduce immigration. It is game on.With 7and a half billion people on the planet things are going to bend in very different shapes to what we are used to.
    Younger Australians are having to compete with the world , not just with their fellow Australians for housing and wages in their own country.
    If anything is going to be done , it will ,and must come from the people most affected , the younger (40 below) generation.

  6. It’ll all be fine …. we’ll have a massive recession soon, all those miserable sub-40s who are struggling will lose their jobs, they’ll be forced to default on their mortgages and all their debts will be cleared via the bankruptcy process.

    Clean slate. Problem solved.

  7. Just look at what has happened in Toronto. Pop!! Toronto is suffering the same fate as previous property bubbles.

    Toronto has many similarities to Sydney and Melbourne. Large cities in politically stable in medium sized first world countries. Unsustainable rises in values that have become fundamentally disconnected from reality, and record amounts of housing debt. Significant number of offshore buyers (China). Now rising interest rates (central bank). Banks tightening lending criteria. Additional tax on offshore buyers. Softening clearance rates. Rising Canadian dollar (making Canadian prices look more expensive to offshore buyers).

    Sound familiar.

    But Aust looks to be in worse shape than Canada with a weaker economy, mining and manufacturing shrinking, and wage stagnation.

    Better to sell 6 months too early than 6 weeks too late. Lots of people will be wishing they had got out some months back when the market sentiment was greed, and FOMO (fear of missing out). Now it is fear and FONBATGO (fear of not being able to get out). The exits in Toronto have suddenly become very tight.


    “The median detached selling price in the GTA plunged 10.6%, for a one-month loss of $115,000. Ouch.
    The median (not average) sale price in July was $960,000, compared with $1.275 million in April. That makes the 90-day decline a stunning 24.7%.”

  8. Under 40s will also be liable for the environmental debt they inherited from their ancestors.

    Nature doesn’t do payment-plans.