Housing expert cautions aspiring homeowners to think twice before buying a property, as years of debt and financial pressure could now outweigh the benefits.
Professor Hal Pawson, associate director of UNSW’s City Futures Research Center, said it doesn’t make as much sense to buy a property today as it did 30 years ago.
In new research published this week, Professor Pawson found that Australians carry some of the largest debt in the developed world because of everyone’s fervent – and sometimes unfounded – desire to own a home.
“We are concerned that the value of homeownership is somehow degraded,” Professor Pawson told news.com.au.
âThe ratio of household debt to GDP is getting bigger and bigger. “
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The professor, who co-authored a recent explosive report titled Housing: Taming the Elephant in the Economy, said young people were trying to emulate the ‘financial windfall’ of the baby boomer generation by entering the market. immovable.
However, this poses a major problem.
âThe benefit for people who become homeowners is certainly much less than what we’ve seen for people who made the transition 30 or 40 years ago,â said Professor Pawson.
“Housing prices are good, way above what they were in the 90s.”
He said people looking for huge sales would be disappointed.
âOne of the reasons there is so much desperation to be a first-time buyer (is) because the previous generation did so well,â he explained.
“But the unearned financial gains of owning a home will not happen again.”
The report’s findings ultimately concluded that people who just bought a home would be “worse” than previous generations.
“On the contrary, it (the property market) is making some Australians, the rich and the older, better off by making Australians younger and poorer, as well as future buyers, worse off,” the report said.
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The report also found that Australia is one of the most indebted developed countries, beating the United States, United Kingdom and Canada.
âThis is a ranking that you don’t want to be in the lead,â Prof Pawson explained.
There is an “internationally unusual amount of debt on bank balance sheets.”
Australians have $ 2.1 trillion in home loans outstanding, research shows.
In 1990, household debt to GDP was 70 percent.
Fast forward 30 years and that level has risen to almost 185%.
This could be a major problem when these debt owners retire.
“Almost all retired Australians (at the moment) own their homes,” Professor Pawson said.
âIt doesn’t cost them much to live. “
But recent trends indicate that people approaching retirement age will not own their property, which could cause them to default on their loans or rent their homes into old age.
“If this is the case, there will be pressure to increase the national pension,” Professor Pawson said.
According to the professor, there is nothing wrong with trying to enter the housing market, as long as you know what you are facing.
âThis (owning property) is still an understandable and fairly rational aspiration,â Professor Pawson said.
âHome ownership has great benefits – you get more control and you get more security. “
But the policies, intentionally or unintentionally, are designed to help owners of the baby boomer generation, at the expense of everyone else.
âThe housing market is made to benefit current owners,â he said.
He thinks government support like the Homeownership Program, aimed at getting people into the housing market, “is contributing to the problem.”
“Those kinds of efforts to give first-time buyers an edge are pretty doomed to failure,” he said, as they continue to raise house prices.
Professor Pawson warned that it wouldn’t take much – like a hike in interest rates – to kick some homeowners and future homeowners out of the market for good.
âThe most likely thing that will happen is that interest rates will rise,â he said.
âWe haven’t seen sustained interest rates for 20 to 30 years.
“(Such an increase) will put more pressure on existing mortgage holders.”
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