Australian housing market, real estate boom exposes looming disaster

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A housing expert is warning aspiring homeowners to think twice about buying a property because the years of debt and financial pressure may now outweigh the benefits.

Professor Hal Pawson, Associate Director at UNSW’s City Futures Research Centre, said that it doesn’t make as much sense to buy a property now as it did 30 years ago.

In new research published this week, Prof Pawson found that Australians carry some of the largest debts in the developed world because of everyone’s fervent – and sometimes unfounded – desire to own a home.

“We’re concerned that the value of home ownership is sort of degraded,” Prof Pawson told

“The ratio of household debt to GDP, that’s been getting bigger and bigger.”

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The professor, who co-authored a bombshell recent report titled Housing: Taming the Elephant in the Economy, said younger people were trying to mimic the “financial windfall” of the baby boomer generation by entering the property market.

However, that presents a major problem.

“The benefit for people becoming homeowners is certain to be a lot less than the benefit we’ve seen for people who’ve made the transition 30 or 40 years ago,” Prof. Pawson said.

“Housing prices are far, far above what they were in the 90s.”

He said people looking to make a huge turnover would be disappointed.

“One of the reasons there’s so much desperation to be a first homebuyer (is) because the previous generation did so well out of it,” he explained.

“But the unearned financial gains of being a homeowner is not going to be repeated.”

The report’s findings ultimately concluded that people who had just bought a place would be “worse off” compared to previous generations.

“Rather, it (the property market) makes some Australians, the affluent and older, better off by making younger and poorer Australians, and also future buyers, worse off,” the report states.

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The report also found that Australia is one of the most indebted developed countries, beating the US, UK and Canada.

“It’s a league table you don’t want to be top of,” Prof Pawson explained.

There is an “internationally unusual amount of debt on banks’ balance sheets.”

Australians have $2.1 trillion in outstanding home loans, research revealed.

In 1990, household debt relative to GDP was 70 per cent.

Fast forward 30 years and that level has risen to almost 185 per cent.

That could be a major issue when these indebted homeowners retire.

“Almost all retired Australians (at the moment) own their home outright,” Prof Pawson said.

“It doesn’t cost them much to live.”

But recent trends indicate that people nearing retirement age will not own their properties outright, which could cause them to default on their loans or rent into their old age.

“If that is the case, there will be pressure to increase the national pension,” Prof Pawson said.

There is nothing wrong with trying to get into the housing market, as long as you know what you’re up against, according to the professor.

“It (owning a property) is still an understandable and quite rational aspiration,” Prof Pawson said.

“Home ownership has great advantages – you get more control and you get more security.”

But policies, whether intentionally or not, are designed to help out homeowners from the baby boomer generation, at everyone else’s expense.

“The housing market is being made to benefit current homeowners,” he said.

He believes that government support like the first homebuyer’s scheme, aimed to get people into the housing market, actually “contributes to the problem”.

“Those kinds of efforts to give first homebuyers an advantage are quite self-defeating,” he said, as they continue to raise the prices of property.

Prof Pawson warned that it wouldn’t take much – like a rise in interest rates – to kick some homeowners and aspiring homeowners out of the market for good.

“The most likely thing that will happen is interest rates will rise,” he said.

“We haven’t seen any sustained interest rates for 20-30 years.

“(Such a rise) will put more pressure on existing mortgage holders.”


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