21 July 2023

Was it really easier for your parents to buy their first home?

| James Coleman
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Zango auction sold sign.

Do Canberra’s first home buyers stand a chance? Not if you’re on a single-income, figures suggest. Photo: Michelle Kroll.

“It’s ridiculous.”

Liv, aged 22 and halfway through a bachelor’s degree at the University of Canberra (UC), echoes what almost all her peers are saying at the moment.

“My parents, back in 2012, sold a six-bedroom house on a massive block for $600,000 and now you’d be lucky to get an apartment for that,” she tells Region.

“So my plan is to work full-time for the next few years after university, and then I’ll probably try to move down to somewhere like Adelaide, which has slightly more achievable housing.”

According to CoreLogic data from May, the median price for a house in Canberra sat at $943,253 and a unit at $597,370.

Throw in a 20 per cent deposit and a variable rate of more than six per cent on the remaining mortgage (and that’s before we count $4000 every year after that in land rates) and it’s little wonder many young people are thinking the great Aussie dream of owning your own home is, in fact, little more than a dream.

This is reflected in the data too. According to the Australian Institute of Health and Welfare, 50 per cent of Australians aged between 25 and 29 owned their own home in 1971. This dropped to 46 per cent in 1991, and then 36 per cent in 2021.

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Dr John Hawkins is a senior lecturer in the School of Politics, Economics and Society at UC and agrees.

“The proportion of people in their 20s who own a home is considerably smaller than it was a few decades ago,” he said.

“The average house price in Canberra is slightly off its peak from about a year ago, when it was almost a million dollars, but it’s still well above the $700,000 it was pre-COVID.”

So what’s going on? Are you simply splurging too much on lattes and avocados, or was it really easier for your parents and grandparents to buy a home?

The deposit

According to recent data from property firm CoreLogic, if the average Canberran was to put away 15 per cent of their gross income every year, it would take them 9.6 years before they’d have a 20 per cent deposit on a house. A unit isn’t much better, at 6.1 years.

This is nearly two years longer than the decade-average.

To take it back further, the average cost of a Canberra house in 1990 was $122,000, or four times the average annual income. Nowadays, the average cost is $951,800, or more than 10 times the average annual income.

That’s a lot of avocados and solidifies what many already suspect – a home in Canberra is practically out of reach for single-income households.

The mortgage

Once you’ve coughed up a much larger sum than your parents or grandparents had to, the repayments on the remaining loan is where the playing field starts to level out. But only for a brief period.

What will often come up is the higher cash rate in the past, and it’s true – it reached a record 17 per cent in January 1990. At the time, the average mortgage across the country was $66,300 and average wages $23,600, so mortgage repayments made up 48 per cent of annual income.

Nothing to sniff at, and also similar to today. The average home loan is currently $577,000 and variable rate around six per cent, which means mortgage repayments make up 44.5 per cent of annual income.

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But there is a difference.

“My experience when I was in my 20s was you borrowed what seemed like a lot of money at the time, so you had to be a bit restrained in your spending,” Dr Hawkins says.

“But fairly quickly, inflation and wage increases meant your repayments became a smaller proportion of your income, so it didn’t take very long before you were comfortable.”

For instance, 10 years later in 2000, the variable rate had dropped to slightly more than it is now (6.8 per cent) and mortgage repayments were down to around 34 per cent of average annual income.

So while they might be on par with those in the early 1990s, home owners are considerably worse off now than they were 20 years ago.

What’s next?

Dr Hawkins expects we’re over the hump when it comes to further increases to the cash rate, but the deposit situation will take much longer.

“Generally, to get house prices down, you need more houses built to increase the supply,” he says.

“Are enough new homes being built to meet the increased demand? It looks like – at least in the short term – no.”

The ACT Government owns all the land here and home owners really only lease it for a period of 99 years. This means it’s up to the government to release land for development, and we’re needing more. A lot more.

“We currently have around 180,000 dwellings in the territory and we believe that we will need that to grow to around 210,000 over the next five years,” Chief Minister Andrew Barr said in July 2022.

“That’s reflective of the sort of population growth that the city has experienced.”

Housing development.

New dwellings in Coombs, but the government’s land releases are still lagging far behind population growth. Photo: Michelle Kroll.

Over the next five years, land will be released for an extra 30,000 homes and units, or 6000 per year. This is nearly double the annual average of 3430 between 2016 and 2020, but since 2016, the ACT’s population has also jumped by more than 66,000 people. That’s more than four times the number of new dwellings.

And even if first home buyers in the ACT have been exempt from having to pay stamp duty (or ‘conveyance duty’) since July 2019, Dr Hawkins says it’s still affecting the housing market on the whole.

“It tends to stop people moving house, which means people are stuck in houses that aren’t necessarily suitable for them because it costs so much to sell one house and buy another.”

Dr Hawkins describes the ACT Government’s plans for more houses and less stamp duty as steps in the right direction, even if “you can argue about whether they’re being done quickly enough”. He says Australia’s young families, while jaded, are yet to accept the fate of their European peers, many of whom are prepared to rent for life.

“The fact that few young Australians own their own home isn’t that few of them want to own their own home,” he says.

“It’s just they find they can’t afford it.”

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August ’67, brand new $11,865, 3 b’room, 2 mortgages (including $7000 ‘D of I’), 2 kids, 1 income < $2000pa !!, coy. car, no rates, no stamp duty……sold '73, $27,500.

Incidental Tourist5:47 pm 24 Jul 23

Small private Investors were an important part of the housing supply for generations. Most units and townhouses from 1960s till 2000s were built by “mum and dad investors” while owner occupiers built houses. But late changes to Land Tax and Tenancy act made residential investing unattractive. Hence we observe decreasing private funding of the housing market, less housing supply and higher prices. Public housing will remain a tiny slice of the housing market for the foreseeable future. Those well off will always buy new houses but the rest of the market – the youth, tenants and first home buyers alike will suffer more from chronic housing shortage as a result of ill populist policies.

A big part of it is if you buy a normal house in an older suburb and pay a premium for that suburb.

If you buy a house in a new suburb they don’t seem to build normal houses anymore.

This means you can’t buy a 3 bedroom, one loungeroom, one bathroom no garage house in a new suburb. This type of house is what our parents bought as their first home.

Presumably because building a McMansion with multiple bathrooms and living areas is more profitable.

What this article fails to acknowledge is that the homes previous generations bought were different from the homes now bought. First home owners then bought smaller homes with lower quality inclusions than now. Now, there are more building regulations that add to costs and reduce affordability. Comparing homes then with now must take into account these and other differences in the nature of housing.

devils_advocate11:49 am 24 Jul 23

This is the same as cars, computers or anything else people buy, as well as products such as smartphones which didn’t previously exist.

These improvements are intended to be paid for through increases in real wages.

The fact that this is not happening is the real crime.

People’s income are now much higher, there are more dual income households and the social welfare is far more generous – those on NDIS affording townhouses because apartments are too hard to live in. More immigrants receiving money from overseas where multiple generations live in the same household. Need I keep going?

devils_advocate10:02 am 24 Jul 23

“People’s incomes now are much higher”


Higher than what? The only increase in wages has been in nominal terms. For decades the increases in productivity have overwhelmingly flowed to the owners of capital with the workers left to fight over the scraps.

Real wages have gone down for decades and corporations have gotten more powerful, dictating wages and consumer prices alike.

But I blame gen xers and millennials. The vast majority don’t know what a picket line is, and certainly don’t know the appropriate response to anyone who attempts to cross one.

The NDIS doesn’t pay for housing AND is not means tested (so you can be a dual income household on $500,000 a year or like me a single low income household on less than $25,000 a year), so I really don’t get what your point there is?
It is ONLY to cover disability related therapies and supplies (the exception being those that need supported accomodation, but ‘rent’ isn’t paid by NDIS) and even then it doesn’t cover all of them.
The NDIS has literally nothing to do with housing OR income.
Also, these services were technically already being provided by governments and NGO’s funded by the government, just in a bunch of different programs with no clear guidelines, the NDIS centralised the services into a national program to make the bureaucracy far less difficult to navigate and removing to need for participants to have to engage in multiple different program providers to access everything needed.

Also, up until the last 10-15 years or so there were next to no apartments in Canberra (that weren’t government housing), so not sure what your point with apartments and townhouses is.

Karen Stirling8:46 am 23 Jul 23

It is about being realistic sbout what you can sfford. My daughter in her 20s bought a 1 bedroom unit in canberra for low 300,000. Government paid her stamp duty as a 1st home owner. It is in an older block of units but it is hers and over time she will do up the kitchen and bathroom and pay it off.

devils_advocate11:23 am 24 Jul 23

The entire point of economic progress is that each subsequent generation is better off than their parent’s generation.

That means higher REAL wages, fewer hours worked and a higher standard of living.

The reality is that current home buyers have to be far more “realistic” about their expectations than previous generations.

More generally, if you think that the younger generation should suffer just because you did, you might be a horrible person.

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