SUMMARY OF FINDINGS

INTRODUCTION

Housing costs are the ongoing outlays incurred by people in providing for their shelter. For many households, this expense is one of the largest single items of regular expenditure. The data collected on housing outlays in the Survey of Income and Housing Costs (SIHC), which provides most of the data used in this publication, are limited to major cash outlays on housing. Some data are available from the Household Expenditure Survey (HES) on the split between interest and capital repayments on mortgages, see Household Expenditure Survey, Australia, Detailed Expenditure Items (Cat. no. 6535.0).


HOUSING TENURE

Australia has a high rate of home ownership. In 1997–98, there were seven million Australian households (diagram on page 3). Of these, 39.4% owned their homes outright while a further 30.4% were paying off a mortgage or loan secured against their dwelling. Renters accounted for 28.2% of households. A small number of households were living rent free and these have been excluded from the following analysis and tables in this publication.

The likelihood of households owning their home outright increases progressively through the life cycle as purchasers pay off their mortgages. As the population ages, so the proportion of outright home owners might be expected to increase. However between 1995–96 and 1997–98, the proportion of outright owners fell by 2% and the proportion of purchasers rose by 2% (table 21). Taking into account different collection methodologies in historical surveys, particularly for owners (see paragraph 19 of the Explanatory Notes), the level of outright ownership has been relatively stable from the late eighties until more recently.


HOUSING TENURE, Average Age of Household Reference Person

	1988	1990	1994	1995–96	1997–98
	- years -	- years -	- years -	- years -	- years -
Owner without a mortgage	57.9	58.1	58.4	58.4	60.1
Owner with a mortgage	39.9	39.9	39.5	40.1	40.8
Renter	39.3	39.1	39.1	39.1	39.4

From 1995–96 to 1997–98 the average age of owners without a mortgage rose from 58 years to 60 years and the average age of people still paying off a mortgage rose from 40 years to 41 years, suggesting that people are entering home ownership later or they are taking longer to pay off their mortgages. The reasons for this are unclear. However, financial deregulation in 1986 and the subsequent increase in interest rates, the increasing diversity of financial instruments and alternative investments may be contributing factors. The more recent lower interest rates may also be a contributing factor in that some purchasers may not see a need to pay off their home more quickly.


HOUSING COSTS

Housing costs cover different items for different types of tenure. For households renting, housing costs comprise the regular rental amounts paid to landlords. For owners with a mortgage, they comprise the value of the mortgage payments where the main purpose of the mortgage is home purchase (see Explanatory Notes) as well as property rates. For owners who have no mortgage held against the dwelling, or the main purpose of the mortgage is for non-housing purchases, housing costs comprise only the rates paid. Housing costs do not include the imputed rent of owner occupiers, nor the imputed value of income foregone on the owner's equity in the dwelling. Owner housing costs would be considerably higher if such imputations were included in housing costs.

In 1997–98 there were 6.9 million households living in owner-occupied dwellings or in rented accommodation (table 2). The mean (average) weekly housing costs for all households was $110. However, there was considerable variation in housing costs with half of all households having payments of less than $71 per week (see median housing costs).

Housing costs for owners with a mortgage, at an average of $205 per week, were higher than for other forms of tenure. Households renting from private landlords had mean weekly housing costs of $157, compared to $63 for those renting from a State housing authority (SHA).




LIFE-CYCLE STAGES

Households can vary considerably in terms of their size and composition, as well as their housing tenure and the type of dwelling they occupy. All of these factors, along with location of the dwelling, will influence their housing costs.

Households may be small as is the case for young single person households and those containing young childless couples. They tend to grow in size as the couples get older and have children. Household size usually reaches its peak when parents and their dependent and adult children share the same dwelling. As children leave home, household size again declines.

The tenure of the dwelling tends to follow a similar progression to the life cycle of the occupants. This cycle follows a pattern of renting accommodation in early adulthood, moving to home purchase and mortgages while raising a family and owning the accommodation outright without any mortgage in older age. Other factors that affect housing payments, such as income, are similarly related to life-cycle stages. For these reasons, housing payments and occupancy will be examined in terms of the life-cycle progression.


YOUNG SINGLE HOUSEHOLDS

Young one-person households are relatively few in number—334,300 in 1997–98 (table 11). The majority of young singles under the age of 35 are still living with parents and many others are sharing houses.

The high cost of living alone may be one of the deciding factors in their choice of shared housing. For young singles living alone in 1997–98, over half (57%) were renting from private landlords (table 12) with mean weekly housing costs of $124, constituting an average of 26% of their gross weekly household income (table 11). An additional 28% of these young single households were buying their home and were paying off a mortgage. Their average housing costs were higher, at $202 per week or 30% of gross weekly income. The 5% of young single households renting from a State housing authority had much lower housing costs of $45 or 23% of gross income. Overall, a relatively high proportion of young single households were living in flats or apartments—42% of this group compared to an overall rate of 12% for all households (table 1).


COUPLES ONLY, UNDER 35 YEARS

Young couple households were more likely to have moved into home purchase than their single counterparts. Of the 353,100 young couple only households in 1997–98, approximately 189,000 or 54% were paying off a mortgage and 5% had already paid off their mortgage. An additional 40% were renting from private landlords and almost none were tenants of State housing authorities.



Young couples buying their homes were paying considerably more for their housing than those who were renting from private landlords—average weekly housing costs of $261 and $173 respectively. This represented 21% of gross weekly income for the purchasers and 17% for private renters.


HOUSEHOLDS WITH DEPENDENT CHILDREN

Couple households

The trend to home purchase increases as couples become parents and raise their children. For couples with young children under 5 years, 57% were paying off a mortgage and 14% were owners without a mortgage (table 12). Over one-quarter of the couple families with young children were still renting their accommodation and these were mainly renting from private landlords. Average weekly housing costs varied for different types of tenure from $230 for those with a mortgage to $34 for those without a mortgage (table 11). Renters from State housing authorities were paying $79 per week and private renters $168.

On average, couple households with young children were allocating a greater proportion of their gross income to housing than households at any later stage of the life cycle. This reflects the fact that these young couples have both higher average housing costs and lower average incomes than households with older children.

Average housing costs declined from $182 per week for couples with young children to $163 for couple households with the eldest child 5–14 and to $122 for those with the eldest dependent child aged 15–24 years. By the time the couple households had only non-dependent children present, average weekly housing costs were as low as $71.

However, for couples in the later stages of child rearing, housing tenancy becomes increasingly diverse and average housing costs tend to camouflage very different experiences between households. For example, for couples with the eldest child aged 15–24, the mean housing costs were $122 per week. However, the median housing costs show that half of these households were paying less than $74 per week. This reflects the fact that these families were almost evenly divided into two groups—those who owned their homes without a mortgage and those who were still paying off a mortgage.

Household incomes for couples, and hence their capacity to pay, also peak around the age where children are growing up. For example, average incomes for households with the eldest child aged 15–24 were $1,256 per week in 1997–98. The average housing costs of $122 for this group constituted only 10% of this average income.

One-parent households

While 15% of one-parent households owned their homes without a mortgage in 1997–98, 24% were still paying off a mortgage and over 60% were renting their accommodation. Compared to most other households, a high proportion of one-parent households (22%) were renting from a State housing authority.


Housing costs were similarly varied for one-parent households with different types of tenancy—ranging from a low average of $21 per week for owners without a mortgage to a high of $162 for those with a mortgage. Of those renting, renters from private landlords paid an average of $136 compared to $62 per week for renters from State housing authorities.

Incomes also varied considerably across one-parent households, mainly reflecting their different attachments to the labour force. Owners paying off a mortgage tended to have higher average weekly incomes than those in other tenancy arrangements—$680 compared to $432 for those renting from private landlords and $361 for those renting from State housing authorities. The group with the highest proportion of their income committed to housing payments were those who were renting privately with average payments of $136 a week, constituting 32% of gross weekly income.


EARLY RETIREMENT YEARS

For many parents, the need to accommodate dependent children has ceased by the time they reach their mid-fifties. Some older couples will have only non-dependent children present (420,700 in 1997–98) (table 11) and a smaller number of couples (369,400) will be again living alone.

There is a sharp decline in average household income after the last non-dependent child leaves home. Some of this is due to the decrease in the number of earners in the household with the departure of those children. However, there is also increased likelihood of early retirement for some parents. In 1997–98, 39% of couples aged 55–64 and living alone had neither partner in employment. Notwithstanding this trend, the group is quite diverse as is evidenced by the high proportion of the group (35%) with both partners employed (table 12). The wide disparity in income for couples in this age group is clear from the fact that while the mean weekly household income was $718, there were 50% of these households with an income of less than $524 (median income).

Over three-quarters of couples aged 55–64 and living alone were owners without a mortgage. Their housing payments were low at an average of $21 per week, or 3% of total household income. Approximately 17% of the households were owners with a mortgage and both this group and those who were renting were paying substantially higher proportions of their income in housing payments (18%).


OLDER HOUSEHOLDS

By the traditional retirement age of 65 years, both incomes and housing payments have been greatly reduced. In 1997–98, 90% of older couple households were owners without a mortgage (table 12) with average weekly housing costs of $18. For older couples who still had a mortgage, these repayments were also considerably lower than those of their younger counterparts at an average of $68 per week. This reflects in part the fact that these households would have purchased their first home some 10 to 20 years earlier when home prices and mortgages were considerably lower.

However, for the small proportion who were renting, housing payments consumed relatively large proportions of their incomes. In 1997–98, approximately 37,700 or 7% of couples aged 65 and over were renting, with average housing payments of $94 or 26% of their average weekly income. The 19,800 who were renting from private landlords were spending an average of 30% of their income on housing payments and the 14,600 State housing authority renters were spending an average of 21%.



In 1997–98 there were approximately 614,500 lone-person households with the occupant aged 65 years or over. The lone older people were less likely than the older couples to be owners without a mortgage—75% and 90% respectively. A relatively high proportion of older people living alone were State housing authority renters—14% in 1997–98. A further 6% were renting from private landlords. While the dollar value of their housing payments was lower than for the older couples with similar tenure, they were paying higher proportions of their incomes for their housing.

The higher proportion of older single people than older couples in rental accommodation is accompanied by a shift in the types of dwellings they occupy. Just under one-fifth of older single people were living in flats or apartments rather than houses compared to 5% of older couples. Indeed older single people are more likely to be renting apartments than any other life-cycle group apart from young single people.

Combinations of factors such as the small household size and the relatively low household incomes may be motivating factors for this type of accommodation for these two groups at the beginning and end of the life cycle. Some of the older single people also live in flats attached to houses occupied by their children.


VALUE OF DWELLING

Owners were asked to estimate the value of their dwelling. This estimate may differ from valuations made by accredited valuers or the actual sale price of the dwelling. The extent of the difference has not been measured. Therefore, some care needs to be exercised in the analysis of these data.

The median value of owner-occupied dwellings was $145,000 (table 15). Couples with children generally reported higher values than other household types, reflecting a requirement for larger dwellings. Couples with dependent adult children and couples with dependent and non-dependent children reported the highest values with $175,000 and $174,000 respectively, 20% above the national median. The average number of bedrooms in dwellings was highest for these families (3.6 and 3.8), compared with the national average of 3.1.

The median value of dwellings for capital cities was $164,000 (table 18) which is 13% higher than the national median ($145,000). The median value was highest in Sydney at $251,000, followed by Brisbane ($153,000), Perth ($152,000) and Canberra ($152,000). In Sydney the median value of dwellings increased by 19% from 1995–96 to 1997–98. In 1997–98, 35% of Sydney households reported a dwelling value over $300,000 compared with 22% in 1995–96 (table 19).


RECENT HOME BUYERS

There were almost 1.1 million households who were recent home purchasers (that is they purchased in the 3 years prior to the survey) (table 20, page 37 of the publication). Of these, 42% were first home buyers and 58% were changeover buyers. The majority of recent home buyers purchased an established home accounting for 82% of first home buyers and 77% of changeover buyers.

The median value of dwellings varied according to whether the household was a first home buyer or changeover buyer and whether the dwelling was new or established. For first home buyers the median value was $124,000 compared to $161,000 for changeover buyers (table 20, page 36 of the publication). The median value of new homes was $165,000, about 22% more than established homes. However, new homes were also bigger with an average number of bedrooms of 3.3 compared to 3.0 for established homes (table 20, page 37 of the publication).

Housing costs for recent home buyers varied according to whether the household was a first home buyer or changeover buyer, a reflection of first home buyers' larger mortgages. First home buyers had higher housing costs and spent a greater proportion of their income on housing, 21% compared to 16% for changeover buyers (table 20, page 35 of the publication). First home buyers were generally younger than changeover buyers, with two-thirds of first home buyer households aged less than 35 compared with only 19% of changeover buyers (table 20, page 37 of the publication).