As home ownership in Australia drops, “permanent renters” are set to dominate the market, a senior economist told reporters.
BIS Shrapnel managing director Robert Mellor forecast that home ownership will most likely drop substantially by 2021 and will have “significant social and financial consequences.”
“I think home ownership is in sharp decline. First-time buyer demand is not recovering... it’s very weak, particularly in NSW,” he said.
Citing industry figures, Mellor added that home ownership in the under-35 age group could decrease from 43% in 2011 to 23% by 2021, or an average rate of 2% annual decline.
“Many people won’t get into the market into their late 30s and 40s… they are in for permanent rental,” he said.
Further, unlike the generation born after World War II, younger generations are not prepared to leave the city life and move to the suburbs. He calls them “permanent renters,” whose home ownership preferences will have major social costs because they will still need money for rent after retirement.
“I think there are significant social consequences, financial consequences, as a result of that change,” Mellor said. “I think governments don’t necessarily need to throw more money at it, but they certainly need to look at it. Otherwise, we’re in for a permanent change.
“It’s a major issue and one that we’ll need to watch closely in terms of how it impacts upon the market,” he said.
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