Home ownership is a key cultural icon in Australia. Australians have traditionally aspired to the modest Great Australian Dream of “owning a detached house on a fenced block of land. Home-ownership has been seen as creating a responsible citizenry; according to a former Premier of Victoria, “The home owner feels that he has a stake in the country, and that he has something worth working for, living for, fighting for.
The Australian government has encouraged broad-scale home-ownership through tax incentive (although mortgage interest is not tax deductible as, for example, in the USA); as a result, 70% of households own their own homes — one of the largest proportions of any nation. The prevalence of home-ownership has meant that renters and owners are not divided as sharply along income lines as they are elsewhere: 55% of low-income households and 80% of high-income households are home-owners.
In the past, home-ownership has been a sort of equalizing factor; in post war Australia, immigrant Australians could often buy homes as quickly as native-born Australians. Additionally, Australian suburbs have been more socio-economically mixed than those in America and to a lesser extent Britain. In Melbourne, for instance, one early observer noted that “a poor house stands side by side with a good house.
Home-ownership in modern Australia, however, is becoming more exclusive. The ratio of Australians’ average income to the price of the average home was at an all-time low in the late 1990s. Young people are buying homes at the lowest rates ever, and changes in work patterns are reducing many households’ ability to retain their homes. Simultaneously, homes that are being constructed are increasing in size and holding fewer people on average than in the past. The fraction of houses with four or more bedrooms has increased from 15% in 1971 to greater than 30% in 2001.
Australia’s housing market is showing signs of recovery, backed by lower interest rates and improving affordability. The house price index for 8 capital cities rose by 2.6% (0.1% in real terms) during the year to Q1 2013, according to the Australian Bureau of Statistics (ABS). It was the second consecutive quarter with a nominal y-o-y increase, after a series of price drops since Q2 2011.
Darwin had the highest price increase during the year to end-Q1 2013 (8%), followed by Perth (6.1%) and Sydney (3.6%). Smaller nominal price increases were also recorded in Canberra (1.5%), Brisbane (1.4%), Melbourne (1.1%), and Adelaide (0.9%). Out of Australia’s eight capital cities, only Hobart experienced a price decline of 1.9%.
Australian housing is rather expensive, and there is not enough new supply. Sydney has the most expensive housing in Australia, with the median house price at AU$ 673,681 (US$ 620,353), about 26.2% above the weighted average. Some critics say that the housing market is severely overvalued.
The supply side of the housing market remained flat during the first quarter of 2013, as the Reserve Bank of Australia (RBA) decided to hold interest rate at 2.75%, in contrast to an expected rate cut. Housing approvals in April 2013 were up by only 3% on the previous year, according to ABS.
Acquisition of residential real estate by foreign nationals and corporations is subject to Foreign Investment Review Board (FIRB) approval.
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