What does success look like in housing policy?

Australia’s housing market has been getting plenty of attention of late – it’s become harder to get a mortgage, especially for investors; offshore investor interest has dropped off sharply; and prices have been falling for a year now.

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There’s a lot of moving parts – but how do they fit together and impact housing policy?

"Framing the policy debate around choice is more important than ever - and improving the rental experience should be a priority.”

A sharper downturn in prices might generate broader concern but the fall in prices is by and large welcomed based on the perception it will improve housing affordability.

Yet if mortgages are more difficult to obtain and there are simply less of them, it is arguable whether this will actually result in higher rates of home ownership.

But is housing affordability the goal we should seek? And how do we measure success?


We tend to presume more people buying and owning a home is desirable – even though Australia already has a very high home ownership rate.

According to the 2016 census, 67 per cent of Australians owned their home (either outright or with a mortgage). While this is down from 70 per cent in 1986 it compares with home ownership rates of 64 per cent in the United States, 63 per cent in the United Kingdom and New Zealand and just 52 per cent in Germany.

Shouldn’t success ultimately rest on more people having choice about their housing options? Those with the means who want to buy should be able to. And renters should not only be those who are unable to buy – renting should be a positive option too.

Australia’s high but long-term trend decline in home ownership is something of an anomaly, with only New Zealand showing similar trends.

Here the key influences are financial deregulation and demographics. Both factors tend to raise home ownership. An OECD study on home ownership across 12 countries found “innovation in mortgage markets appears to have boosted aggregate homeownership rates and rough estimates suggest that this effect appears to be broadly comparable with the impact of population ageing”.

Conversely, in Australia’s case, home ownership rates while high have actually declined as mortgage market innovation has risen and the population aged.

One specific local factor boosting home ownership may be, as the OECD notes, “the acquisition of the family home is likened to the attainment of the national dream”. So too in New Zealand.  

Even if true, fulfilling a dream still requires means. Australia’s historically high rate of home ownership may simply have reflected Australia’s status as a wealthy advanced economy with low population density.

There has been both means (wealth) and opportunity (space). With relatively high population growth the opportunity may be diminishing, exacerbated by the shift from an industrial to a service economy.

Service industries are often more concentrated in major population centres. It was only in 1950 almost half of Australia’s employment was in the manufacturing and agriculture sectors.

Moreover, while Australia’s population has been aging, in recent years population growth has been running at a fast clip. Growth of 1.6 per cent year-on-year is well above average population growth across advanced economies of just 0.4 per cent year-on-year and faster than world population growth of 1.2 per cent.

Importantly, two-thirds of the current strength is being driven by immigration. The OECD has found in general “the rising share of immigrant households temper home ownership” as the “probability of home ownership is generally lower for immigrant households”.


In Australia’s case the traditional ownership boosting impacts of financial innovation and demographics have been swamped by other factors. These factors may well continue to entrench an ongoing decline in Australian home ownership.

Framing the policy debate around choice is more important than ever - and improving the rental experience should be a priority. Issues such as security of tenure, minimum standards for rental properties and the rights of tenants come to mind.

However, again, there are anomalies with Australia: the rental stock is mostly owned by individuals, rather than co-operatives or corporations, RBA data shows.

Efforts to encourage other forms of ownership remain an important policy area. Short-term rental platforms present an additional challenge to the extent they further erode the supply of homes available for longer-term family rental.

Improving housing affordability is an important goal. It would clearly be desirable if more people in Australia were in a position to buy a home.

That doesn’t mean, however, more people will or should take up the option. This also shouldn’t preclude more focus on a better, more-flexible rental market.

Joanne Masters is Senior Economist & Richard Yetsenga is Chief Economist at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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