View of the Melbourne city skyline from Mickleham Road in Greenvale. Generic urban sprawl, urban development, new housing estate, outer suburbs, housing developments, urban fringe, rooftops, green wedge, rural fringe, city planning, commuter suburbs. Picture by PAUL ROVERE / THE AGE. 31 March 2011. NEWS View of the Melbourne city skyline from Mickleham Road in Greenvale. Generic urban sprawl, urban development, new housing estate, outer suburbs, housing developments, urban fringe, rooftops, green wedge, rural fringe, city planning, commuter suburbs. Picture by PAUL ROVERE / THE AGE. 31 March 2011. NEWS
Melbourne homeowners are spending a smaller portion of their income on mortgages than 10 years ago, due to lower interest rates, challenging perceptions and the prevailing levels of mortgage stress.
The average mortgaged household in Victoria spent $439 a week on housing in 2015-16, down $12 from two years ago, but up from $396 in 2005-06. The increase was more than offset by rising incomes.
The amount spent by the average household renting in the private market stabilised at $359 a week in Victoria, but was still $100 higher than in 2005-06. Those renting in the state system paid $172 a week on average, up $26 in just two years.
The figures released on Friday by the n Bureau of Statistics, show that around the country the average mortgagee spends 16 per cent of household income on housing – down from 19 per cent a decade ago. It is the lowest rate since the ABS records began more than two decades ago.
That was largely down to the huge reduction in interest rates, which remain at near-record lows, and the growth in household incomes over the decade, the ABS said.
John Daley, of the Grattan Institute, warned the housing affordability crisis persisted in spite of the figures.
“Spending on housing is not going up particularly fast. But only because interest rates have fallen so far,” he said. “If interest rates go up from here, it will get ugly quite quickly.”
Across the nation, the average mortgagee household now, for the first time, spends more of its income on food than it does on housing. Housing costs include mortgage payments and water and rate payments.
Adjusted for inflation, the average mortgaged household paid $434 per week in 2015-16, much the same as in 2005-06. But over the same period the average income climbed from $2272 per week to $2759.
“Mortgage and property values have also increased in the last decade,” said Dean Adams, the ABS director of household characteristics and social reporting. “Ten years ago, the real median dwelling value was $449,000, which climbed to $520,000.”
Mr Adams said the burden imposed on mortgagee households might be even lower than the survey suggested.
“Our survey measures what they chose to pay in mortgage costs, not what they had to pay,” he said. “As rates have come down, some will have spent more than they need to in order to get ahead on their loans.”
Canberra is the easiest city in which to pay off a mortgage, with monthly payments of 15 per cent of income, a near record low. Sydney and Hobart have monthly payments of 17 per cent, and Melbourne, Brisbane, Adelaide and Perth monthly payments of 16 per cent.
But housing costs have deteriorated for renters. The average cost for households renting privately is $350 per week, less than the $452 cost for mortgaged households, but as a record high of 21 per cent as a proportion of income, up from 19 per cent 10 years earlier. Renters in public housing pay less again – $167 per week – but the cost also amounts to 21 per cent of household income.
Private renters are worse off in Hobart, paying 22 per cent of household income, and best off in Darwin. Sydney, Canberra and Adelaide renters pay 21 per cent, and Melbourne, Brisbane and Perth renters 20 per cent
The proportion of households renting privately has climbed to 25.7 per cent, the highest on record. Twenty years ago it was 19 per cent. The proportion owning or buying homes has slipped from 70.9 to 67.2 per cent.
Among home-owning households the proportion that have paid off their mortgages has fallen dramatically, from 42.8 per cent of all households to 31.4 per cent.
The proportion of older households still paying off mortgages has tripled in the past 10 years, climbing from 7 per cent to 21 per cent.
Mr Daley said the most important finding was that low-income households were increasingly stressed. The poorest were now spending 28 per cent of their income on housing, compared to 23 per cent 10 years ago. Most middle income earners had seen little change.
Two out of every nine homeowners owned more than one property, either for use as a second home or for renting out. One in 14 owned more than three.
The number of people per home fell from 2.7 in 1995-96 to 2.5 in 2005-06, but has since climbed back to 2.6.
Treasurer Scott Morrison this week moved to reassure US investors, and n investors, that is not headed towards a housing market crash, arguing house prices are high but their value is still “real”.
His comments followed the Domain Group’s State of the Market report, which found growth in house prices in Melbourne had slowed, but has still risen in every quarter for five years.