A leading social researcher says that if, as a new report argues, the Great Australian Dream home ownership continues to exclude many younger and poorer people it will have profound effects on treasured notions of Australia as an egalitarian place of the fair go with strong grassroots communities.
Mark McCrindle, who heads social research firm company McCrindle, says that with house prices having risen much faster than incomes, especially in Sydney and Melbourne but also to a lesser extent elsewhere, the dream of mass home ownership is under threat.
“It hasn’t disappeared but it’s certainly under pressure,” Mr McCrindle said.
This was reinforced on Tuesday by a report from Melbourne research and public policy think-tank the Committee for Economic Development of Australia.
The report argued that mainly due to supply and demand imbalance, prohibitively high house prices were likely to continue for the next 40 years and that policy makers would have to be prepared for shrinking home ownership among the more disadvantaged socio-economic groups.
Mr McCrindle agrees that even if housing prices stop increasingly sharply, they will remain stratospherically high compared to average wages for the foreseeable future.
“The problem is here to stay,” he said.
“It’s a new reality and there will have to be new solutions brought to the fore.”
Mr McCrindle said that despite the imposing financial hurdle, young people still wanted to own a home eventually.
“Partly Generation Y have responded to this new era by not giving up on the Great Aussie Dream but by kicking it down the road,” he said.
With the median age of giving birth now at 31 it showed people are holding off on starting families, Mr McCrindle said.
“The point is that worrying about insecurity and the need for housing is normally coupled with the nesting stage,” he said.
“Because that is occurring later in life, for the 20-somethings it has become a life stage of living with parents or travelling or volunteering or gaining other life experiences.”
Mr McCrindle also noted that younger people were spending longer in secondary and tertiary education.
“We’ve got a generation who aren’t even starting their economic life until a bit later than their parents did because they study later,” he said, pointing out that this also meant they amassed student and other debt even before entering workforce.
“All that conspires to take that Great Australian Dream a little further from reach,” he said.
This has created a wealth gap between generations, often leaving children dependent on a bit of family assistance to own a home, which isn’t available to everyone.
“The great hope is something from one’s parents, either while they are around to support that deposit or underwriting a loan or further along in some sort of estate, but that’s certainly not the case for all,” Mr McCrindle said.
“We’re starting to see even more of that fragmentation of wealth. If we look at the quintiles of wealth in Australia the top 20 percent of households on average have a net wealth which is 71 times greater than the bottom 20 percent.”
“What is going to happen over the next 20 years as $1.5 trillion gets passed on to the next generation is that there will be even more of a spread and the haves will do fine and the have-nots won’t receive anything.”
Mr McCrindle believes that this will seriously impact on traditional notions of Australia as a relatively classless and very cohesive society.
“The Australian Dream is based on a compact that if you work hard than even someone of middle earning someone in average employment will be able to acquire a home of their own,” he said.
“And our suburbs really exemplify that. They are a great melting pot of all backgrounds.
“You’ve got the labourer and the professor, you’ve got the doctor and the plumber, everyone mixes in the suburbs. And that is starting to change firstly with wealth stratification but secondly there are those who can afford homes and those who can’t.
“I think that is a breach of what has been this approach that we are this egalitarian society, get a job and do your best and there will be something there for you.”
This will also have serious long-term consequences in terms of people achieving sustainable financial independence, as traditionally the home acted as a retirement fund for many Australians.
“If we end up with a generation or large proportions of a generation who say ‘well forget about home ownership’ they are giving up on what has been the national savings mechanism and saving mechanism in Australia,” Mr McCrindle said.
“The unintended consequence is that they end up spending that money on lifestyle pursuits, travel and so on and while they might enjoy the journey they end up with no security and that’s the downside of it all.”
Mr McCrindle also believes that having a generation of renters is likely to impact whether people will deeply invest in their neighbours and neighbourhoods, leading to all the associated expressions of belonging such as strong local community groups, schools and churches.
“The average tenure of an Australian who has paid off their home, which is about a third of Australians is 18 years,” he said.
“The average tenure of a renter is 1.8 years. So that means every three years or so people have moved across a couple of places. It’s hard to build community it’s hard to build engagement when people are staying a year-an-a half or a little over per place.”