Home ownership continues to fall as the great Australian dream gets more distant for many

The great Australian dream of home ownership appears to be just that — a dream — for an increasing number of Australians, with now nearly a third of households renting.

Twenty years ago only about quarter of Australian households rented.

The flip side is that home ownership has fallen from 70 per cent of households in 1998 to 66 per cent last year, according to detailed analysis from the Australian Bureau of Statistics.

It is the lowest proportion of home ownership in Australia since the ABS started the data series in 1994.

However, while home ownership is on the slide, the proportion of households still in debt has risen sharply.

Two decades ago, 40 per cent of households had paid off their mortgage. Last year that figure had fallen to 30 per cent.

While those renting, as a proportion of all households, rose from 27 per cent to 32 per cent over the period of the study, the proportion of public housing tenants halved from 6 per cent to 3 per cent of the population.

Housing tenure by category

Renters spend more on housing than owners

The ABS study found the average weekly housing costs for all Australian households were $311, but vary significantly for different tenure types.

• $53 for owners without a mortgage
• $484 for owners with a mortgage
• $366 for renters

Over the past 20 years, that represents a 51 per cent increase in housing costs (inflation adjusted) for mortgage-free households and public housing tenants and a 52 per cent increase in costs for renters.

But falling interest rates have meant that costs for those with mortgages rose by a comparatively more modest 40 per cent.

"Interest rates have remained relatively low over the past several years and we have seen a recent softening in the rental market in some major cities," ABS chief economist Bruce Hockman said.

On average, private renters paid 20 per cent of their income on housing costs, compared to 16 per cent for owners with a mortgage and 3 per cent for households who owned their home outright.

Housing costs by category

Affordability tougher for public tenants

The study also looked at housing affordability via the ratio of housing costs to gross household income.

It found while the affordability ratio had not changed much over 20 years for owners with a mortgage (16 per cent) and renters from a private landlord (20 per cent), it had become much tougher to move out of public housing into home ownership.

The housing affordability index for public housing tenants has risen from 17 per cent to 23 per cent over the period of the study.

Bad mortgage debt stabilising

In better news for the housing market, the proportion of households slipping behind in mortgage repayments appears to have stabilised after a steady rise earlier in the year.

The global credit rating agency Standard and Poor's said its index for Australian prime mortgages was largely unchanged in May.

"Arrears fell across most of the country in May, with small declines in the key states of New South Wales and Victoria," Standard and Poor's said.

Only the Australian Capital Territory and Tasmania recorded increases.

However, there is a degree of seasonality in the figures, with declines in arrears commonly recorded in May, once the financial impact of Christmas has washed through and household finances tend to stabilise.

"We expect the stabilisation in arrears to continue in the next quarter," Standard and Poor's analyst Narelle Coneybeare said.

"Interest-rate and tax cuts will assist with debt serviceability, aided by the historical seasonality of arrears.

"We believe these factors will mainly affect the less-severe arrears categories and that borrowers who are deeper in arrears are more likely to struggle due to fewer refinancing options."