Country Profile

Source:, Australian Housing, 2008

The Australian housing system and cultural psyche has been dominated by suburbanized ownership of single detached dwellings since the 1950s. By mid 1960 the proportion of home owners reached a peak of 71 per cent, and has since remained at or slightly below the 70 percent mark [1]. In 2008, the home ownership rate was 68 per cent, split 35 per cent between purchasers and 33 per cent outright owners [2]. Up until early 2000, the purchaser rate had been falling steadily since the mid-1970s, partly attributed to the decline in borrowing amongst younger buyers [3].In the last decade the purchaser rate has grown despite the overall decline in the rate of home ownership. This recent reversal in the long-run decline in the purchaser rate can be linked to larger loan sizes and the growing popularity of mortgage equity withdrawal or borrowing against existing mortgages and the outright owned home [4].

A long history of ownership in Australia has seen the emergence of a highly complex mortgage market with potential home buyers and investors now required to navigate hundreds of loan products, financial intermediaries, and lending institutions. Despite this complexity and increasing competitive pressure leading to the ‘softening’ of lending standards, housing finance has remained somewhat more prudently regulated by international comparison. Leading up to the global final crisis, the sub-prime market comprised less than two percent of lending, with the significant majority of loans originated with the four major banks or smaller Authorized Deposit Institutions (ADIs) overseen by APRA [5].  

Australia’s housing system is also characterized by a well-established private rental market, recently growing to around 24 per cent of households who are predominately housed in single detached or low to medium density units/apartments owned by small scale investors. The favorable taxation of property ownership, particularly negative gearing, has been influential in stimulating this type of investment amongst single property landlords [6]. The past twenty years has seen a transformation of the type of private rental accommodation available, with significant development and investment growth in the moderate to high-end and an overall reduction in the low-end or more affordable segment of the market [7]

Public or social housing in Australia remains the minority tenure at around five percent of dwellings. The profile of public residents has changed considerably from the 1950s when housing was allocated primarily to families with a permanently employed breadwinner. Over the past decade the publicly provided rental sector has become increasingly reserved for the lowest income and highest need groups in the population [8].  

While the majority of households in Australia enjoy a high standard of living and housing security relative to other developed nations, unprecedented house price inflation is challenging this status for growing numbers of low to moderate income households. Stapledon’s (2009, p.1) historical analysis beginning in 1880 through to 2007 reveals that in the decade between 1996 and 2007 there was a real house price increase of 87 per cent, more pronounced than for any other cycle of growth [9]. While house prices were falling leading up to the GFC, by late 2008they quickly reverted back upwards following the economic stimulus measures to ‘boost’ first time ownership and maintain construction activity. In 2009 the median price of a dwelling in the major cities was $459,900 [10].The rapid growth of house prices ahead of incomes, as well as the highly urbanized population concentrated in its major capital cities, has placed Australia amongst the highest ranked least affordable places to buy a first home [11].  

Central affordability concerns amongst housing analysts focus on increasing ‘deposit gaps’ of annual household income to purchase price, declining age of entry and rising LVRs for new purchasers, reductions in after housing incomes and persistent stress and insecurity especially for those remaining in and excluded from entering private rental housing [12].Although there are now signs that house prices are beginning to contract, there will need to be significant falls before housing would be considered affordable for many low to moderate income households. At the same time, any substantial fall whilst improving affordability will increase the vulnerability of negative equity amongst first home buyers who flooded the market during 2009.  

In 2007, after more than a decade of withdrawal, a Federal Housing Ministerial position was recreated charged with the responsibility of monitoring housing supply through the establishment of the National Housing Supply Council and implementing key initiatives including NRAS to increase the supply of affordable rental housing and to achieve the White Paper goal of halving homelessness by 2020 [13]. In addition, the Federal Government has invested a total of $16 billion in RMBS as part of economic stimulus to help sustain channels of securitized finance and competition within the mortgage market [14].

[1] Kryger, T (2009) Home ownership in Australia–data and trends, Research Paper No 21, 2008-2009, Parliament of Australia, Department of Parliamentary Services.

[2] ABS, Australian Social Trends, Dec 2010, Cat. No. 4102.0, viewed January 2011.

[3] Yates, J 2007, Affordability and access to home ownership: past, present and future? National Research Venture 3: Housing affordability for lower income Australians. Research Report No. 10, Australian Housing and Urban Research Institute, Sydney.

[4]Parkinson, S, Searle, B, Smith, S, Stoakes, A & Wood, G 2009, ‘Mortgage equity withdrawal in Australia and Britain: towards a wealth-fair state?’, European Journal of Housing Policy, vol. 9, no. 4, pp. 365-389.

[5] House of Representatives Standing Committee of Economics, Finance and Public Administration 2007, Home loan lending: inquiry into competition in the banking and non-banking sectors, Parliament of the Commonwealth of Australia, Canberra.

[6] Berry, M 2000, ‘Investment in rental housing in Australia: small landlords and institutional investors’, Housing Studies, vol. 15, no. 5, pp. 661-683.

[7] Burke, T 1999, Private rental in Australia, viewed 30 March 2006, . Yates, J, Milligan, V, Berry, M, Burke, T, Gabriel, M, Phibbs,P, Pinnegar, S & Randolph, B 2007, Housing affordability: a 21st century problem. National research venture 3: housing affordability for lower income Australians, Australian Housing and Urban Research Institute, Melbourne.

[8] Australian Institute of Health and Welfare 2007, Australia’s welfare 2007, AIHW Cat. no. AUS93, AIHW, Canberra.

[9] Stapledon, N 2009, ‘Housing and the global financial crisis: US versus Australia’, The Economic and Labour Relations Review, vol. 19, no. 2, pp. 1-16.

[10] REIA and Mortgage Choice Real estate market facts, quarterly review of major property markets in Australia, June Quarter 2009, 2010, viewed January 2011,

[11] Demographia 2011, 7th Annual Demographia international housing affordability survey: 2011 ratings for metropolitan markets, data for 3rd quarter 2010, viewed February 2011,

[12] Yates, J, Milligan, V, Berry, M, Burke, T, Gabriel, M, Phibbs,P, Pinnegar, S & Randolph, B 2007, Housing affordability: a 21st century problem. National research venture 3: housing affordability for lower income Australians, Australian Housing and Urban Research Institute, Melbourne.

[13] Milligan, V & Pinnegar, S (2010) ‘The comeback of national housing policy in Australia: first reflections’, International Journal of Housing Policy, vol. 10, no.3, pp.325-344.

[14] Swan, W (2011) Exit from the government guarantee of large deposits and wholesale funding, Ministerial statement, House of Representatives Canberra, 8 February 2010, viewed February 2011,

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Reserve Bank of Australia (RBA)

The Reserve Bank of Australia (RBA) is Australia's central bank and derives its functions and powers from the Reserve Bank Act 1959. Its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.