Young Australians hit by falling wages, surging house prices as wealth gap widens: HILDA report
By business reporter Michael Janda
Updated 2 Aug 2017, 12:03pm

RELATED STORY: Mortgage debts and childcare costs skyrocket as wages stagnate

Australian households are stuck in a rut, and young people are confronting the double-whammy of stagnating incomes and surging home prices.

Those are the key financial concerns that arise out of Australia's most comprehensive household survey.

Known as HILDA — the survey of Household Income and Labour Dynamics in Australia — it has been tracking the economic and social situation of more than 17,000 people since 2001.

The key concern in the latest HILDA report is an alarming, persistent income stagnation.

"Household incomes have stopped growing — since 2012 we've actually had a slight decline in average household income," said the report's author, Professor Roger Wilkins from the Melbourne Institute.

Earnings inequality also increased, there has been a marked shift to part-time work and underemployment has surged.

But Professor Wilkins said inequality had remained relatively steady despite those forces, due to progressive taxation and more low income people gaining employment.

"Since the GFC that hasn't translated into increased inequality in incomes and that's very much because we've done a very good job of keeping employment-to-population rates quite high," he observed.

"We saw a rise in wealth inequality up to the GFC, but since the GFC there's been very little change in measures of wealth inequality."

Surging house prices locking under-40s out of ownership
However, while the gap between the rich and poor has not widened markedly in recent times, Professor Wilkins said the same cannot be said of the old and young.

"One of the more concerning trends is a growing wealth divide by age group," he said.

"The difference in wealth between the older generations and the younger generations has been growing over time.

"It's very much connected to what's going on in the housing market."

Home ownership for those aged under-40 has plunged from 36 per cent to 25 per cent since 2002.

Graph showing that home ownership rates have plunged from 35pc in 2002 to 25pc in 2014 for young Australians.

Things are even worse in the nation's most expensive property market — less than 20 per cent of young Sydneysiders own a home.

That means young adults are living with their parents longer.

In 2015, 60 per cent of men aged 22-25 and nearly half of women in the same age bracket were living with their parents — that is up from 43 per cent and 27 per cent respectively in 2001.

Young home buyers borrow more to 'fund living expenses'
The situation is not a lot better for those young people who have managed to buy a home.

They are now saddled with twice as much housing debt — in real terms, adjusted for inflation — as young people were in 2002.

Between 30-40 per cent of these young home owners actually increased their debt over the previous year.

Should Gen Y buy?
Forget affordability, Michael Janda asks why the hell anyone in Gen Y would want to buy a home right now.
Professor Wilkins said it was mainly for consumption, not to upgrade to a bigger or better house.

"I think that would be a reasonable argument that, in the face of incomes not growing anymore, that people are accessing the equity in their homes to fund their living expenses," he explained.

The exclusion of young people from home ownership, and the financial and social benefits, as well as stability, that it provides is a major concern for Professor Wilkins.

"This is an economic and social problem for Australia that does, I think, require a policy response," he said.

"I think you can't get away from the arithmetic that if you want more home owners, you're going to have to have fewer investors in the market."

Professor Wilkins said that probably means making property investment less attractive by reducing negative gearing and capital gains tax discount benefits. ...

I thought house prices were falling?

A house is only worth as much as someone is willing to pay for it.