Age of home ownership
Furthermore, in a curiously reflexive manner home ownership rates can oftentimes be lower in more affordable locations, with Queensland and South Australia having the lowest home ownership rates of the Australian states.
Thanks primarily low mortgage rates, initial repayments on new housing loans as a share of household disposable income are presently significantly lower than they have been, and are hovering well below the decade average.
Equivalently, the deposit required of a first home buyer is no longer necessarily around 20 per cent of the purchase price, but rather, more often in the 5–10 per cent range.
Though I don't follow the Melbourne market closely, I assume that inner city Melbourne presents similar dynamics.
Unfortunately many first-time buyers in Sydney are not so keen on living in the more affordable areas such as Blacktown or the Canterbury-Bankstown region.
Based on the limited sample of first-time buyers I come into contact with, many prefer to buy an investment property in a so-termed "secondary location" and rent somewhere closer to the city themselves.
This suggests that the risks of a material housing market correction are considerably higher in smaller cities and towns where unemployment rates are elevated - or at risk of becoming so - and where the new supply of dwellings as a percentage of existing stock can be higher.
The RBA notes that tax legislation also to some extent favours owner-occupiers since capital gains are tax free and there is no taxation on imputed rent - although there are no deduction on owner-occupier mortgage repayments in Australia.
As such, if the wealthy citizens of Australia are trying to rort this so-called "tax shelter" that is the prevailing tax legislation, they don't seem to be doing so very effectively.
Noted the RBA:
"The ability to deduct legitimate expenses incurred in the course of earning income is an important principle in Australia’s taxation system, and interest payments are no exception to this.
To the extent that negative gearing induces landlords to accept a lower rental yield than otherwise (at least while continued capital gains are expected), it may be helpful for housing affordability for tenants".
Finally, the RBA submission somewhat unsuccessfully attempted to divert some attention away from the booming Sydney property market through suggesting that the ratio of house prices in Sydney to those in other capital cities is merely reverting to trend.