Housing in a two-speed
economy
Australia’s Welfare Conference 2011
Dr Ian Winter
Executive Director
Australian Housing and Urban Research Institute
The Reserve Bank
“...that over the past decade, for every dollar of extra revenue
we have got in the resources sector around 10 cents is spent
on domestic labour; around 25 cents is spent on buying
domestic services...; somewhere between 15 cents and 20
cents goes back to the state through royalties or taxation and
somewhere between 5 cents and 10 cents goes to the
domestic holders of the shares of the mining company.
When you add all that up, somewhere between 50 and 60
cents of every extra dollar of income that comes into the
country stays in the country, either in the form of taxation,
profits or domestic services and labour..., there is a lot of
extra income flowing around in the economy.”
(Dr Philip Lowe, Assistant Governor, Reserve Bank of Australia, 26 August 2011, House of
Representatives Standing Committee on Economics)
Overview
 How is the two speed economy affecting
housing?
 How is housing affecting the two speed
economy?
 Why does it matter and what can be done?
Housing in a two speed
economy: capital cities
 2001-10, Perth house prices rose 222% (nominal)
 2001-10, Darwin house prices rose 186%
 2008-09, 68,000 people moved in to WA, approx.
27,000 households
 2008-09, 8,000 new land titles created in WA
 2011, housing shortage of 39,000 dwellings in WA
 2001-10, Melbourne house prices rose 144%
 2001-10, Sydney house prices rose 83%
Source house price data: Phillips 2011
Housing in a two speed
economy: resource towns
 2011, Karratha median house price $795,000
compared to $480,000 in Perth
 2011, Karratha over 50% of the housing stock in the
rental market - median rents in excess of $1500 per
week
 2007, Karratha median land price 28% of the median
house price
 2007, Perth median land price 50% of the median
house price
Prime Minister
 “We’re also very determined in these days of change to
take a spatial and regional approach to understanding
our economy. We use the language of the patchwork
economy deliberately because we know that parts of the
nation are travelling very differently; that if you journey
around you can go to places screaming for more people,
screaming for more growth, and you can also go to
places that are screaming about continuing high
unemployment and there people worry about a future for
their kids, so we’ve got to bring an understanding of
regional economic development and space to our work”.
(Prime Minister, speech to the Tax Forum, October 4, 2011)
Index
House prices have risen
faster than incomes
140
Real house prices
120
Real house price trend
100
Real per household income trend
80
60
40
20
0
1960
1970
1980
1990
2000
2010
Source: PC, ABS, RBA, from Yates 2011
Home ownership rates for
young have declined
(%)
80
70
60
50
40
1971 1976 1981 1986 1991 1996 2001 2006
25-29 years
30-34 years
35-39 years
Source: Yates et al 2008
Over 50 and falling out of
home ownership
 11% of a longitudinal sample of over 50s lost home
ownership between 2002–06
 36% of these moved onto housing assistance
programs
 Owner occupiers who exit home ownership after 50
years of age are significantly (29%) more likely than
longer term renters to make transitions onto housing
assistance
 Once older Australians enter housing assistance
programs they are unlikely to leave them
Failure of bottom end of private
rental market
Source: Wulff 2009
Housing in the economy
 Average household size fell throughout 20th century
from 4.5 to 3.0 persons, and down to 2.5 persons in
2006
 1994 to 2009, average size of a new house
increased by 30% from 189 to 245 square metres
 Real expenditure on each new dwelling built was
60% higher in 2008 than it was in 1992
 2006, 108 dwellings for every 100 households
Percentage of houses sold
affordable to low-moderate income
earners
1981
2006
Source: Hulse et al. 2010
Journeys to work
 Greater Dandenong, 3% of resident car
driver commuting trips were into the central
Melbourne LGA
 Greater Dandenong, 64% of commuting
trips were within Greater Dandenong or to
a neighbouring LGA
Source: Yates 2011
Wealth distribution by
tenure and age
Owner-occupiers
($'000s)
$1,000
$800
Owner
$600
occupiers
$400
$200
($'000s)
$0
$1,000
Other households
<25
25-34 35-44 45-54 55-64
$800
owner-occupied
property
Other
$600
households
$400
other property
65+
other net worth
$200
$0
<25
25-34 35-44 45-54 55-64
owner-occupied property
other property
65+
other net worth
Source: Yates 2011
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