Everyone deserves a fair go.
Objective: Ensuring access to affordable, safe and secure housing at all stages of life.
Housing is the most significant cost of living for Australian households. Ensuring that consumers engaging with the housing markets are protected is fundamental, not only because this provides one of the most basic needs for living – shelter, but also because of the scope for significant financial detriment because of poor protections or uninformed decisions.
Structural changes in the demographics of home ownership in Australia are resulting in growing inequality in the acquisition of wealth and capital with implications for Australians at different life stages.
Grattan Institute (2013) found that while overall home ownership rates in Australia have remained largely steady from the 1970s onwards with a slight decline in the last few years, the distribution of ownership has changed markedly. The greatest declines in ownership are within the 25-44 age bracket, and especially amongst single parents. Similarly, there are now 25 per cent more property owners within the top income quintile, when compared with the bottom.
These shifts have meant that younger Australians are not only staying within the family home longer, they are also spending more time in the rental market – some will stay permanently. Australia’s rental regulations have not kept pace with the fact that a growing proportion of the population will rent permanently due to the inability to buy into the property market. Internationally, longer leases along with greater controls given to tenants to make changes to the building fabric and being able to keep pets, have all enabled greater quality of life for tenants.
Little research has been completed to date in Australia as to the extent to which renting also excludes tenants from other markets, products and services. For example, within energy markets, tenants are unable to make investments in solar, hot water system upgrades or insulation without agreement of the landlord, and are generally unable to extract the same value as homeowners when leaving the property.
Similarly, disclosure of the likely ongoing running costs to be incurred by the tenant for the property are not currently transparent, with no requirement placed on landlords or agents to provide potential tenants with any indication of the energy costs of a property.
For most consumers, buying a home is the most significant investment that will be made within their lifetime. Demand has remained strong for properties in capital cities and has been further spurred on by policies promoting population growth, negative gearing and incentives for investors. With house prices at record highs, the potential for consumer detriment within an over-heated market is significant.
An indication of growing concern around borrowing risk within the housing market, in March this year the Australian Prudential Regulation Authority introduced new limits on bank mortgage lending, with banks forced to limit ‘higher risk’ interest only loans to 30 per cent of all new residential mortgages and to keep investors below a growth rate of 10 per cent. Ensuring consumers have access to transparent and trusted advice when making investment decisions around purchasing a home is critical to the stability and confidence of a market, which many predict may burst in the near future.
The most common transaction process in the housing market (auctions) has also been raised by stakeholders as a concern. Reforms have recently been introduced by the Victorian Government to address concerns raised around underquoting, with laws now requiring that the advertised price of a property must be either a single figure, or a price range of not more than 10 per cent. It is not clear what impact these changes will have on consumer confidence. With increased demand for new housing stock, stakeholders have also raised concerns around the lack of effective redress for homebuyers ending up in building disputes. The new Domestic Building Dispute Resolution Victoria was established in April 2017, with high demand for the service from consumers. Analysis of the effectiveness of this dispute resolution body in improving consumer outcomes is yet to be determined. Ensuring homebuyers are supported to make effective decisions when purchasing a home, along retaining confidence and stability within the housing market.
Retirement & downsizing – Aged care, retirement villages and new alternatives
With an aging population, there has been rapid growth in demand for aged care, retirement housing, special residential services and home equity loans. In particular, for the group of older Australians that have been unable to buy into the property market (thus providing capital to make housing decisions for next stage of life) low cost housing options are being sought. While downsizing appears a rational and effective means to access extra capital for retirement, research suggests that “vast majority of older Australians continue to choose to age in place in larger suburban dwellings” rather than downsizing.
New service models are appearing in response to government policy changes. Delivering research which establishes a solid understanding of the structural changes of these markets and the products and services being offered, is critical to ensuring older Australians are not placed at undue risk when entering such arrangements. A focus on transparency, literacy, along with analysis on shifts in products, services and protections being offered to older Australians within the housing market will be central to informing further policy development.
The CPRC intends to focus on one key research initiative in each of the above market segments, to improve consumer and community outcomes within the housing sector for Australians of all ages.