Home ownership on the decline – Michael Yardney

The proportion of Aussies who own their own homes is falling, creating a chasm of wealth between the housing “haves” and the housing “have nots”. Michael Yardney from Metropole Property Strategists has been watching this closely and he has some advice for would be investors and indeed for young first time buyers as well.


Kevin:  Something is rotten in the state of the Australian housing market. The land of the fair go has given rise to – reportedly – some of the most unaffordable homes in the world. The proportion of Aussies who own their own homes is falling, creating a chasm of wealth between the housing haves and the housing have-nots. But even for those lucky enough to afford to buy their homes, home ownership is no longer the guaranteed path to riches that it once was – at least not for everyone.
Michael Yardney from Metropole Property Strategists has been watching this closely.
Michael, thank you for your time. Is it as bad as that – the haves and the have-nots?
Michael:  Well, Kevin, let’s put some things into perspective. First of all, we know that true wealth is much more than how much money you have or how many properties you own, but recently, Credit Suisse’s Annual Global Wealth Report showed that Australians have the highest median wealth in the world, and we also have the lowest percentage of poor people in the world.
We also know that in this lucky country, it doesn’t take education or your country of birth or your parents to put you in the BRW Rich 200 list. Anyone can become wealthy in Australia. So yes, there are some disparities in the housing markets, but we still live in one of the best places in the world, Kevin.
Kevin:  Michael, in the opening, I did mention that there are fewer homeowners. Is that actually the case?
Michael:  Yes, it has dropped from about 69% of the population owning their home or having a mortgage on their home to about 67%, but it still is one of the highest percentages in the world.
And I remember years ago – when it was around 70% – people said, “Houses are unaffordable. Our kids are never going to be able to afford properties, and it will drop to 50% ownership.” That really hasn’t been the case, Kevin.
Kevin:  Is the gap widening?
Michael:  There is a smaller percentage of people owning their own home, but it’s not a big drop. One of the interesting changes though is that more people have a mortgage against their home, and that’s because they borrow against it. A lot of baby boomers and Gen X-ers are borrowing against equity in their home to buy an investment.
But the other point that you made in your opening is very relevant – that some areas outperform others. Not all land is created equal, and that is going to make a difference to homeowners and particularly to property investors over the next decade.
Kevin:  So it is a matter of where you buy, Michael?
Michael:  It’s a matter of where you buy. A study by the AHURI – the educational organization run by the government – showed that properties closer to the CBD had substantially more capital growth than properties in the outer suburbs. But Kevin, it wasn’t always that way.
Kevin:  What do you mean, Michael?
Michael:  Interestingly, prior to 1980, houses in outer suburbs cost much the same as equivalent houses in inner suburbs, but over the last couple of decades, things have changed. Properties close to the CBD and close to the water have increased in value, in part related to the way we live, demographics, and the gentrification of the inner suburbs.
Kevin:  What opportunities exist for young people to get into the market now?
Michael:  There are still opportunities. Just like when you and I started, houses were unaffordable for us. They’re unaffordable for some young people, but what they have to do is get a deposit, get a saving discipline, save up some money, and get their foot on the property ladder.
The other big thing people are doing now is because of the change of lifestyle, many young people are buying properties in those more upcoming areas – those that have better capital growth – by swapping their backyards for balconies. And that fits in with today’s lifestyle in many ways, Kevin.
Kevin:  Yes, it has to be adaptable. Do you think it could be a generalization that our generation – yours and mine, because we’re both about the same age – was more fortunate when it comes to home ownership?
Michael:  There’s no doubt that we lived through a period of time when our homes increased in value considerably, but it was also a time of high inflation. When I bought my first property, it cost $18,000 and I got $12 a week rent. But the average family car cost about $1000, as well.
In fact, things have gone up proportionately. Inflation has been one of the things that has driven the value of our property. But with inflation today at 2%, you don’t have to have double-digit capital growth to have real growth of property values or rent.
Kevin:  Yes, I remember when we bought our first property – in fact it cost us $11,500 at the time, I think – and I remember how much of a strain that was then. You look back on it now and think, “Wow, that’s not even a deposit nowadays.”
Michael:  And you probably took a 30-year mortgage and had no idea how you were going to pay it off.
Kevin:  Absolutely. Yes, many sleepless nights. But it’s all relative, isn’t it?
Michael:  It is. So, the message for young people or investors is that you should get in the property market and get going.
Now, for investors, it does mean that not all land is created equal. Some land is going to increase in value more, related to scarcity and amenity and where people want to live. So, in my mind, this study has confirmed what I’ve intuitively known. In fact, I’ve read a similar study about ten years ago from Macquarie Bank that properties closer to our capital cities and closer to amenities and the water, in general, are going to outperform the outer suburbs. Sure, there are always exceptions.
Kevin:  Michael, lovely talking to you. Thank you very much, as usual. Michael Yardney from Metropole Property Strategists. Thanks for your time.
Michael:  My pleasure, Kevin.

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