Falling homeownership rate changing rental market

The Centre for Housing Research has been looking into the decline in homeownership rates which have fallen from a high of 73.7% in 1986 to 66.9% in 2006.

Professor Philip Morrison, who wrote the report, says that the decline in homeownership rates is a result of structural shifts in the housing market, and not just a deferral of homeownership by the young.

Morrison thinks there is a more permanent shift due to the underlying economics of homeownership.

“We are seeing a generation of home buyers who are postponing purchasing, and we don’t know if that’s what driving the fall in homeownership or whether there is another set of factors to do with affordability that means we’re on a long term path of lower home ownership rates,” says Morrison.

Since fewer people are buying homes the rental market is growing and it could produce demand in areas not traditionally considered rental areas.

Morrison says some people may decide permanently not to go into home ownership, in which case they’ll be looking for rental properties which would meet many of their other wishes in terms of a home that they own – perhaps a larger home in a leafy suburb.

This suggests for investors that the range of neighbourhoods and range of types of properties that would be attractive to renters is probably going to broaden.

Morrison says that first home buyers are tending to purchase outside the city in order to get into the homeownership market. This means places that might not have necessarily been high ownership areas in the past may well be attractive to owners now, particularly if they are low cost areas, simply because people are interested in just getting a foot in the door.

There also seems to be a growing demand for multi unit properties. More households are compensating for the rising cost of ownership by purchasing multi unit properties, traditionally the preserve of renters.