Is the Great Australian Dream ‘dead’?

Mortgage stress is typically used when borrowers need to allocate more than 30 per cent of their income to repayments.

The analysis assumed that borrowers would need a 20 per cent deposit and would be paying a loan term of 30 years on an average interest rate of 8.8 per cent (assuming long-term wage and house price growth trends continue, as well as the share of their income it would take for them to make repayments on a mortgage for a median-priced home).

This was then assessed against the average salary of the top 10 most common professions (as per ATO data) and found that childcarers would need to assign nearly all (92 per cent) of their income to mortgage repayments, while sales assistants would need to set aside 90 per cent of their income.

This was followed by:

• Receptionists (83 per cent of income needed to meet repayments)
• Aged and disabled carers (71 per cent)
• Retail managers (69 per cent)
• General clerks (67 per cent)
• Truck drivers (60 per cent)
• Primary school teachers (53 per cent)
• Registered nurses (50 per cent)
• Accountants (39 per cent).

When looking at how long it would take for the top 10 most common professions to save for a 20 per cent deposit on a 30-year mortgage, the analysis found that – assuming a borrower saves 15 per cent of their earnings per year – it would take lower-income earners such as childcarers, receptionists, and sales assistants decades to save a 20 per cent deposit, if at all.

For example, for a sales assistant (the most common profession in Australia), the analysis found they may “never” be able to save for a home deposit, due to the growth of house prices at a rate faster than wages.

Meanwhile, if a full-time childcare worker began saving today to buy a home, it would take them until 2055 to save for a 20 per cent home deposit (even after factoring in a 10 per cent increase in 2025 and a further 5 per cent increase in 2026, as per the government’s recent pay rise decision).

For a primary school teacher, it would take until 2036 to save for a home deposit, while a nurse wouldn’t have the typical deposit until 2035.

Source: The Greens

While many options are available to borrowers who cannot save for a 20 per cent deposit (including Lenders Mortgage Insurance, Government Guarantee Schemes, and first home buyer grants), the Greens have suggested that the analysis demonstrates that home ownership is “completely unattainable” for many of the country’s most common and essential professions.

Max Chandler-Mather, the Greens’ spokesperson for Housing, said: “For far too many the Australian dream of owning a home is dead, and it’s been killed by Labor and the Liberals with tax handouts to property investors.”

Chandler-Mather said capital gains tax discounts (introduced in 2000) were largely to blame.

“These tax handouts are $165 billion worth of fuel that Labor is pouring on the raging fire that is Australia’s housing crisis, and until Labor scraps them, we’ll never get it under control,” he said.

“Labor pretends to care about home ownership but the reality is they are giving property investors billions of dollars in tax handouts that turbocharge house prices and deny childcare workers, nurses and teachers the chance to buy a home.

“Millions of renters have been caught in a cruel trap, stuck paying massive rents, at best decades away from saving for a home, where even if they can get a mortgage the repayments are completely unaffordable.

“How long do the millions getting screwed by Australia’s broken housing system have to wait for this painfully unambitious government to grow a spine and start taking real action on the housing crisis?”

Several brokers have also recently told The Adviser that they have seen many first home buyers change their home buying decisions based on servicing issues, but most are able to find solutions to ensure borrowers are able to access financial solutions.

Similarly, new research from Macquarie University's Department of Applied Finance has shown that young adults still consider home ownership a priority,

Professor Elizabeth Sheedy from the Department of Applied Finance and colleagues interviewed 70 young adults aged between 18 and 40 for the paper Young adults and the housing challenge, co-authored with Dr Syed Shah and Dr Terry Pan.

They found that 60 per cent of the respondents considered home ownership to be a major life goal, while a fifth said that while they would like to own a home, they don’t currently see it as a pressing life goal. A minority (14 per cent) either rejected home ownership as a financial goal, or expressed significant ambivalence.

Despite affordability issues, few were giving up on home ownership due to lack of affordability. Only 7 per cent said they thought ownership was unachievable, although many see it as a challenging goal. Instead, several young adults said they were making sacrifices and trade-offs to achieve their goals while others preferred to delay ownership in order to achieve other goals, including lifestyle.

What’s the government doing about it?

All sides of the political spectrum have been focused on housing affordability and housing supply in recent years, with activity ramping up as Australia nears a federal election (expected to be held by 2025).

The federal government continues to say it intends to deliver 1.2 million new homes over the next five years.

But some of the government’s plans to do this – including its shared equity scheme Help to Buy – have been languishing in Parliament as they face blockages from the Greens, which want to see tax changes for investors (such as removing negative gearing etc).

Chandler-Mather said: “The ball is in Labor’s court, the Greens are ready to negotiate a plan that actually helps people, but we won’t just rubber stamp two bills that will drive up rents and house prices.

“The Greens are ready to work with Labor to phase out the tax handouts to property investors and use the savings to invest in quality government built homes that can be sold and rented for cheap, which is a plan supported by a large majority of the country.

“Right now Labor and the Liberals are on the side of property investors, and the Greens are on the side of the millions of teachers, nurses, childcare workers, and retail workers who just want an affordable home.”

Other recent moves to look at mortgage affordability and home ownership include a new inquiry to examine how Australia’s financial regulation can drive home ownership.

Conducted by the Senate economics references committee, the inquiry seeks to explore ways to reduce lending costs and improve accessibility for first home buyers.

The inquiry will hear from Australian borrowers, the market, and the Australian Prudential Regulation Authority (APRA) and will consider reviewing the current 3 per cent serviceability buffer.

And the newly appointed Housing Minister Clare O’Neil MP (who took over the reins from outgoing portfolio head Julie Collins at the end of July) has now launched a TikTok account so she can “listen to young Australians” and “share more about the Government’s huge housing agenda”.

She revealed this week that the feedback from this cohort has been that they’re “feeling the pressure of rent increases and they’re worried they’ll never be able to own their own home”.

O’Neil said she will be “bringing all housing ministers together in Western Sydney [next week] to make sure we’re working together to build the homes Australians need”.

[Related: Industry bodies set out wish list for Senate home ownership inquiry]