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Home Ownership - The Great Australia Dream?
This is an interesting graph.
It highlights the general downward trend in home-ownership rates in Australia over the past 35 odd years. However what is most pronounced is the fact that:
- The only age cohort that has increased its home-ownerhsip rate over this period is the 65+ age group (who were able to purchase before the property value boom over the last decade); and
- The age cohort with the largest percentage decline in home-ownership over this period is 25-34 year olds, with the 35-44 year olds exhibiting a similiar rate of decline over the ten years to 2016.
Many research papers and articles have been written in recent years on the reasons for this and the importance of arresting this continued downward trajectory. Home -ownership plays a vital role in helping to build strong, stable communities. Property is also an important store of wealth for many Australians, with the family home afforded beneficial treatment under our tax and pension system. Well over 50% of Australians wealth is held in the form of residential property.
Numerous commentators have noted that there are many contributing factors to this declining trend in home-ownership over the past 35 years (particularly the last two decades), whilst making the observation that there is no one magic solution or silver bullet to arrest the decline and turn things around.
What is the Government doing to help Home Ownership?
Three recent initiatives from the Morrison Coalition Government suggest that this issue is at least on the Federal’s Government’s agenda over the next parliamentary term:
- The appointment of dedicated Minister for Housing – the Hon. Michael Sukkar MP (who is also the Assistant Treasurer), the first such appointment in around ten years;
- The recent establishment of the National Housing Finance and Investment Corporation (NHFIC), an independent corporate Commonwealth entity dedicated to improving housing outcomes. The NHFIC offers loans, investments and grants to encourage investment in housing, with a particular focus on affordable housing.
NHFIC is a key part of the Australian Government’s plan to help reduce pressure on housing affordability.
- The announcement of the First Home Loan Deposit Scheme which is planned to commence on 1 January 2020 with the intention of helping eligible first home buyers purchase a house with a deposit as low as 5%. The First Home Loan Deposit Scheme will be administered by the NHFIC.
The Government needs to be commended for its increased focus and policy initiatives directed towards housing and housing affordability.
In particular, the market problem seeking to be addressed (the challenge of saving a deposit to access the property market) with the First Home Loan Deposit Scheme should also be commended. Whilst I question whether or not the Federal Government should be back in the Lenders Mortgage Insurance business (after exiting this business in 1997 via the sale of Housing Loans Insurance Corporation) and certainly not be in the business of effectively lending its AAA rating in partially guaranteeing up to 10,000 first home buyer loans each year for no financial reward (the New Zealand Government’s equivalent scheme charges a 1% premium), at least the Scheme seeks to address one of the main causes of the declining home ownership rate – the challenge of saving the necessary deposit.
What is Granite Home Loans doing to help Home Ownership?
Here at Granite Home Loans we are seeking to tackle the same problem, albeit in a different way, via a 100% home loan solution targeted towards tertiary educated professionals with relevant industry experience. What’s interesting is that the Government’s Scheme cuts off (individual applicants’ income of $125,000 and couples of $200,000) at pretty much the point where the Granite Home Loans eligibility requirements kick in (individual applicants’ income from $100,000 and couples of $180,000 - location dependant).
The challenge is that the Government’s Scheme is limited (at least initially) to the first 10,000 applicants annually, with over 110,000 loans to first home buyers made in 2018, meaning many tens of thousands of people choosing to enter the market will not be able to avail themselves of the Scheme, let alone the tens of thousands of other potential first home buyers on the path to saving their 5% deposit.
Whilst there remain many other challenges to tackle in arresting the decline in Australia’s home-ownership penetration, particularly amongst the younger age cohorts, the Government should be encouraged to continue its increased focus on this important area of our society and economy.
However, Government’s can only do so much. Its important that the private sector continues to innovate to find new and different solutions to meet this generational challenge.
If you're over the Government's First Home Loan Deposit Scheme threshold and want to consider all options, get in touch and check your eligiblity by clicking below.
Granite were with us every step of the way and enabled us to purchase our first (dream) home. We used their 100% loan (no deposit, no LMI) product. Very happy and would recommend them to legal professionals like us who want to buy their first home.Mitchell K