The Federal Government has a big task ahead as it prepares to release its housing affordability strategy in today’s Budget after new research by CoreLogic has revealed the affordability crisis has created an entrenched pessimism about high prices and the prospects of future home ownership.
The latest CoreLogic Perceptions of Housing Affordability survey showed nearly 90 per cent of non-home owners fear not being able to afford to get on to the property ladder and 60 per cent of the population overall believe housing affordability has worsened in the past year. Most do not expect things to improve.
The main obstacles to buying were seen as the difficulty of saving for a deposit, followed by stamp duty costs and competition from foreign buyers, which was most pronounced in Sydney and Melbourne.
The research also found that even among existing home owners, many worried about being able to buy their next house while 8 per cent reported they were already having trouble meeting mortgage repayments.
CoreLogic found this figure would rise to 22 per cent with even a 0.5 per cent increase in interest rates and jump to more than 50 per cent if rates were to rise by 2 per cent.
In another sobering finding, almost two-thirds of those still living at home say they cannot afford to move out (30 per cent of them would be unable to scrape up even a 10 per cent deposit) while many expect to have to stay put until they are at least 30 years old.
A third of respondents said they would probably have to wait for an inheritance or financial assistance from family before being able to afford their first home.
CoreLogic CEO Lisa Claes has warned the crisis could lead to Australia’s first “Cubby House’’ generation, with parents forced to find a compromise solution and incorporate longer-term, independent accommodation for their children within the existing family home.
“Protracted affordability pressures mean the outlook is bleak for many young people who want to fly the nest, so parents and their offspring need to be increasingly resourceful and innovative in the way they approach this challenge,’’ she said. “`Cubby Houses’ could well be the new granny flats.’’
The overall pessimism is highlighted by other findings in the survey:
- The cost of buying a dwelling now takes 7.2 per cent of the annual income of a typical household compared with 4.2 per cent 15 years ago
- It now requires the equivalent of 1.5 years of household income to raise a 20 per cent deposit for a home (0.8 years 15 years ago)
- Servicing a typical loan of 80 per cent of the value of a dwelling now requires 38.8 per cent of household income (25.2 per cent in 2001)
- Dwelling price to income ratios were highest in Sydney at 8.4 times and Melbourne 7.1 times
Download a copy of the report here.
