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4102.0 - Australian Social Trends, 1998  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 03/06/1998   
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Contents >> Housing >> Housing Stock: Wealth in the family home

Housing Stock: Wealth in the family home

In 1995-96 households who owned their home outright had an average equity of $172,000 and for those with a mortgage the average equity was $102,000.

Home ownership is often described as part of the 'great Australian dream', and has been encouraged and promoted by governments over much of Australia's history. Government regulations in the financial sector have affected both the supply and cost of housing finance. Direct measures such as cash grants and subsidies, and the favourable treatment of the family home in social security and taxation provisions have also encouraged home ownership. In 1995-96, over 70% of households lived in their own home.

Home ownership usually contributes to the well being of owners by providing secure and, in the longer term, more affordable housing. For many Australians the equity accumulated in their home represents the major part of their household wealth. As well as financial security for retirement and unemployment, this equity also provides benefits such as collateral for loans for purposes such as cars and holidays, and for other investments.

In 1995-96 the average value of equity of home owners was $144,000. Households who owned their home outright, that is without a mortgage, had an average equity of $172,000 while the average for households with a mortgage was $102,000.

Households who own their home outright have the added benefit of enjoying relatively low housing costs, although to achieve this they forego income that could potentially accrue from investing in other ways. Outright owners, who represented 60% of all owner-occupiers in 1995-96, had housing costs of $21 a week on average. On the other hand, households with a mortgage were faced with relatively high weekly housing costs ($203) compared with private renters ($148) and renters from public housing authorities ($62). However, the repayment of a mortgage represents a form of saving as home owners increase the equity in their home and add to their wealth.


Housing wealth

Value of dwelling is the estimated value of the dwelling and land, as reported by the household respondent in the ABS Survey of Income and Housing Costs. It should be noted that estimates provided by household members may not necessarily agree with the market price or those obtained from certified valuers.

Equity in home is the stated value of the dwelling less the stated value of outstanding mortgages and loans secured against the dwelling. The value of outstanding loans may have been underestimated by some households, such as where the original loan was extended for non-housing purposes. As a result this may have overstated the value of the equity.

Housing costs include the repayment of loan interest and principal repayments, rates payments and, for renters, rent payments.


Home ownership
The proportion of households who are purchasing or who own their home increases progressively with age. In 1995-96 the proportion of households who were owner- occupiers increased from 18% of those aged under 25 years, to 52% of those aged 25-34 years and 82% of those aged 45-54 years.

The proportion of home owners who have achieved outright ownership, by accumulating total equity in the family home, also increases with age. Most young home owners are paying off loans secured against their home, with only 22% of households aged under 35 years owning their home outright. This compares with those aged over 65, where 96% of owner-occupiers were outright owners.

HOME OWNER-OCCUPIERS AS A PERCENTAGE OF ALL HOUSEHOLDS, 1995-96

Owner-occupiers

With mortgage
Without mortgage
Renters
Total
Total
Age group
%
%
%
%
'000

Under 25
13.2
5.1
81.8
100.0
381.4
25-34
41.1
11.1
47.8
100.0
1,373.6
35-44
49.0
23.9
27.1
100.0
1,484.8
45-54
33.1
48.5
18.4
100.0
1,303.5
55-64
12.9
72.2
14.8
100.0
881.0
65 and over
3.3
81.9
14.8
100.0
1,297.7
Total
28.7
42.5
28.8
100.0
6,721.9

Source: Housing Occupancy and Costs, Australia, 1995-96 (cat. no. 4130.0).


Equity in the home
Housing wealth for owner-occupiers is defined as their equity in the family home (including land). It is accumulated through the deposit placed at the time of purchase, through paying off the mortgage principle, and through capital gains and losses as the market value of the dwelling rises and falls over time. The equity is measured as the value of the dwelling, as estimated by the householders themselves, less the reported value of any outstanding loans secured against the dwelling.

For some buyers, high interest payments, combined with falling dwelling values in some periods and some locations, as well as any additional borrowings they have made, may even result in negative equity some years after purchase.

Along with levels of outright home ownership, the amount of equity held in the family home follows a life-cycle pattern. People accumulate a larger financial stake in their homes as they grow older. On average, young home owners have a smaller equity in their home than older home owners. This is because they may not have made enough mortgage repayments since purchasing their home to significantly reduce their loan principle.

However, even for young home owners, the equity in their homes is high. In 1995-96, home owners aged under 35 had an average equity of $85,000 in their homes - 58% of the mean value of dwellings owned by this age group, and over half of the mean equity of all owner-occupiers.

Housing wealth for home owners increased with age, up to 55-64 when the mean equity holding in 1995-96 was $173,000. For households in the older age groups, the value of equity was lower ($155,000). Elderly people were, on average, in smaller and lower-value dwellings.

Larger households generally lived in more expensive homes and also had a higher level of equity in their home, reflecting a need for larger living areas. For example, the average value of equity owned by couples living with their dependent and non-dependent children was $173,000, a value 20% higher than the average for all home owners. In contrast, one-parent households had a considerably lower level of equity ($122,000).

DWELLING VALUE AND EQUITY IN THE HOME FOR OWNER-OCCUPIERS, 1995-96

Mean dwelling value
Mean loan outstanding
Mean equity
Owner-occupier households
Age group(a)
$'000
$'000
$'000
'000

Under 35
147.6
62.3
85.3
787.3
35-44
179.0
46.7
132.3
1,082.1
45-54
188.8
22.7
166.1
1,063.5
55-64
179.2
6.7
172.5
750.2
65 and over
156.2
1.1
155.1
1,106.2

Total
170.8
27.1
143.7
4,789.3

(a) Age of the household reference person.

Source: Unpublished data, Survey of Income and Housing Costs, 1995-96.


Housing wealth and income of owners
Wealth in home ownership is relatively evenly spread across income groups. In marked contrast to this, the ownership of other property and financial assets, such as savings deposits, shares, bonds and interests in superannuation and life insurance funds, tend to be concentrated in the higher income groups.1 Part of the reason is that some population groups with low levels of income also have high rates of home ownership and relatively high amounts of wealth tied up in their homes ('asset rich, income poor'). This is particularly the case with older households.

In 1995-96, home owners in the lowest two quintiles (for all households) held on average a relatively high equity in their homes (around $135,000). This reflects the fact that over half (55%) of the households in the two lowest income groups were aged over 55 years, and that these households had very low levels of loans outstanding.

The level of equity was slightly lower for home owners in the next two quintiles, because of the larger number of younger owners in these income groups, and because they were more likely to have loans secured against the home. Home owners in the highest quintile had the highest level of equity, a result of their considerably higher dwelling values. Households in the highest quintile were generally larger, and most (86%) had two or more income earners.

MEAN DWELLING VALUE AND EQUITY IN THE HOME FOR OWNER-OCCUPIERS BY INCOME QUINTILES, 1995-96

Mean dwelling value
Mean loan outstanding
Mean equity
Owner-occupier households
Gross income quintiles(a)
$'000
$'000
$'000
'000

Lowest - below $282
143.0
7.5
135.5
835.6
Second - $282-495
146.7
12.7
134.0
878.1
Third - $496-798
158.5
27.9
130.6
913.5
Fourth - $799-1,198
164.0
37.0
127.0
1,027.6
Highest - $1,199 and over
225.9
43.2
182.7
1,134.5

Total
170.8
27.1
143.7
4,789.3

(a) For all households, whether home owners or not.

Source: Unpublished data, Survey of Income and Housing Costs, 1995-96.


Dwelling values for owner-occupied homes
In 1995-96, the mean value of all owner-occupied dwellings in Australia was $171,000. However, values of dwellings are affected by a large number of factors, including size; condition; the quality and number of features such as garages, swimming pools, gardens, extra bathrooms, heating and cooling systems; and their proximity to schools, shopping centres and work.

The location of the dwelling is a major factor, with dwellings in capital cities having the highest home values within each State. In 1995-96, the mean value of owner-occupied dwellings in all capital cities was $192,000 compared to $136,000 for homes outside the capital cities. These differences in home values result in very different housing wealth holdings for families across Australia.

The value of homes also varies markedly across different capital cities. In 1995-96, the mean value of owner-occupied dwellings in Sydney was $256,400, while the mean value in Hobart was half of this ($128,400).

Dwelling values also vary according to the type of dwelling structures. Nearly all (90%) owner-occupier households live in separate houses, with 5% in townhouses and other semi-detached houses, and 5% in flats, units and apartments. Separate houses are, on average, worth more than other types of dwellings. In 1995-96, the mean value of all owner-occupied separate houses in Australian capital cities was $195,000 compared to $175,600 for townhouses and semi-detached dwellings, and $164,600 for flats, units and apartments. However, the average value in Sydney of townhouses and semi-detached dwellings ($238,000) and flats, units and apartments ($214,000) was considerably higher than the value of separate houses in any of the other capital cities.

MEAN DWELLING VALUE OF OWNER-OCCUPIED HOMES IN CAPITAL CITIES, 1995-96

Separate house
Semi-detached(a)
Flat, unit, apartment
Total
Mean loan outstanding
Mean equity
Capital city
$'000
$'000
$'000
$'000
$'000
$'000

Sydney
263.3
238.0
214.2
256.4
34.2
222.2
Melbourne
163.3
153.5
110.5
160.2
27.3
132.9
Brisbane
170.0
143.2*
161.1*
168.1
31.7
136.4
Adelaide
140.9
144.9
89.4
138.2
26.0
112.2
Perth
196.5
129.6
150.3
188.0
31.2
156.8
Hobart
130.2
91.9*
101.5*
128.4
20.0
108.4
Canberra
186.5
173.2
133.5*
183.4
43.4
140.0

All capital cities(b)
195.0
175.6
164.6
191.7
27.1
164.6

(a) Includes row or terrace house and townhouse.
(b) Includes Darwin.

Source: Housing Occupancy and Costs, Australia, 1995-96 (cat. no. 4130.0) and unpublished data, Survey of Income and Housing Costs, 1995-96.


How much of Australia's household wealth is in the family home?
In 1995-96, the value of all owner-occupied dwellings (including land) in Australia was estimated at $820 billion. Owner-occupiers held $690 billion in equity in their homes, or 84% of the value of the total owner-occupier dwelling stock.

Households have holdings of wealth in many other forms. Estimates from the ABS Australian National Accounts (which are not completely comparable to the estimates based on household responses) show that the value of dwellings and residential land represents 50% of the total value of assets owned by the household sector. Almost 85% of this was for dwellings occupied by owner-occupiers, the remainder being dwellings owned by households for rental investment, holiday homes and vacant dwellings. Equity in superannuation funds accounted for 17% of household assets, cash and saving deposits 12%, and shares and other securities 8%.


Endnotes
1 Dilnot, A. 1990, 'The Distribution and Composition of Personal Sector Wealth in Australia', Australian Economic Review, 1st quarter 1990, pp. 33-40, Institute of Applied Economic and Social Research, Melbourne.


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