We're living in our homes longer, thanks to soaring costs
As the cost of housing has increased over time, the market has seen fewer overall housing transactions, despite a much larger national population. The high cost of housing is one of the reasons we are seeing fewer transactions however, the costs levied on transacting homes also discourage people from upsizing and downsizing into more appropriate housing. The first of these costs is agent commissions which are typically levied on the sale price, so higher prices means more commission. When someone is looking to purchase, the higher cost of housing also means that they will pay more in stamp duty on that purchase which further discourages people from purchasing and/or upgrading.
As a result of these additional costs to buy and sell there have been fewer home sales and more people live in homes which are either too big or too small for them. In fact, the Australian Bureau of Statistics (ABS) Housing and Occupancy Costs 2013-14 release showed that 78% of households nationally having spare bedrooms, of which 12.5% had at least three spare bedrooms. This suggests most Australians live in homes with more bedrooms than what is required, especially as children move out of the family home, the cost of buying and selling discourages movement into more appropriate accommodation. The high purchase and selling costs may also impact on workplace flexibility with people less inclined to move interstate or move intra-city for employment opportunities.
When this is analysed in more detail, the average length of time between resales of properties is measured and referred to as the average hold period, expressed as a number of years. Nationally houses that resold over the 12 months to June 2016 had been owned for an average of 10.7 years.
The list above for houses shows that many of the council areas with the longest average hold periods are located in either Sydney or Melbourne. Many of these regions also tend to have quite high house values. The high cost of housing in these regions is probably the major deterrent to selling. Outside of Sydney and Melbourne the other regions to have quite long average hold periods are agricultural areas. Those who live in these areas tend to sell their home irregularly and often few people are looking to move into these regions.
The areas with the shortest average hold periods are a little more mixed than the list of longest hold periods. There are regional townships, lifestyle markets, mining areas and areas on the outskirts of capital cities that are experiencing an injection of new housing stock. What is also noticeable is how much lower the typical house value is in all of these regions compared to the previous list of longest average hold period. For the new housing areas in particular you tend to find that these areas are market entry points for first home buyers and after a short period of time as their wages increase home owners in these areas often upgrade.
With the cost of housing continuing to climb we anticipate that generally the average hold period of homes will continue to rise. It also means that instead of shifting homes more home owners will be looking to do renovations to their own homes.
Cameron Kusher is head of research at CoreLogic