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What drives housing outcomes in Australia? Understanding the role of aspirations, household formation, economic incentives and labour market interactions

Summary

Project Number: 80151
Research Theme: Home_Ownership
Project Leader: Wood, Gavin
Funding Year: 2002
Research Centre: Western Australia

Research & Policy Bulletin

Issue 083: What drives Australian housing careers?

Today, the traditional Australian housing career is driven by such fundamental changes in demography and labour markets that it is no longer possible to talk of a single, linear Australian housing career.

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Description

This research models the main drivers of transitions from one step of the housing career ladder to another by specifying and estimating econometric models of these transitions. The models are designed to shed light on the relative importance of the various socio-economic and demographic drivers that determine the pace at which households are able to climb up the housing career ladder.

Our modelling encompasses factors such as separation and divorce that can result in such reversals in fortune. Secondly, socio-economic drivers and in particular labour market variables are typically considered to be causes of housing career transitions. Reverse causation, where housing career transitions can impact on labour market outcomes, are less commonly considered. In this project, various modelling exercises are conducted into reverse causation and its significance in the context of labour market outcomes.

The key databases used are the Household Income and Labour Dynamics in Australia (HILDA) survey and the Australian Bureau of Statistics’ Survey of Income and Housing Costs (SIHC). HILDA represents the most comprehensive longitudinal survey of the Australian population relevant to social, housing, labour market, and mobility modelling. The research is based on Wave 1 of HILDA.

The key findings of the research are:

• The age at which young people leave the parental home has risen in the recent generation to a median age of 21, up from lows in the 1980s (for men median age of 19.6) and early 1990s (for women median age of 18.9).
  
  Higher school retention rates, improved higher education participation rates, delays in partnering and marriage, as well as housing affordability problems and unemployment rates are all important drivers of this change. Lower rates of parental home exit in Sydney and Melbourne imply housing affordability is having a particular impact on such cities.
• Nearly 90 per cent of private tenants do not have the savings needed for a home ownership deposit.
  
  House prices have reached levels at which the up-front cash requirements, the deposit, far exceed the savings of a typical private tenant. Of a sample of 2,769 private tenant income units, 87.3 per cent (2417) lacked sufficient savings to enter home ownership. The majority (2370) of these 2417 constrained income units are unable to meet even the 10 per cent deposit requirement.
• The home ownership rate could be forced down by rising divorce rates that are not matched by rising remarriage rates.
  
  The divorced and separated have much lower rates of home ownership than continuously married couples and similar rates to singles who never married. Divorcees have a 9 percentage point lower probability of home ownership in comparison to the continuously married, all other things being equal. However, divorcees who have remarried exhibit rates of home ownership very similar to that of married couples who have never been through a separation or divorce. As divorce rates are rising but remarriage rates are not, an increasing number of divorcees will remain unmarried and if this eventuates there will be a negative impact on Australia’s home ownership rate.
  

More Information

Research and Policy Bulletin: Issue 083: What drives Australian housing careers?
156 KB PDF Document

Positioning Paper: No. 064: What drives housing outcomes in Australia? Understanding the role of aspirations, household formation, economic incentives and labour market interactions
1.3 MB PDF Document

Final Report: No. 068: What drives Australian housing careers? An examination of the role of labour market, social and economic determinants
1.39 MB PDF Document