Home Ownership Falling, Debt Rising – Its Looking Grim For The Under 40s

Home ownership among young people is declining, as mortgage debt almost doubles for the same age group, results from the Household Income and Labour Dynamics in Australia (HILDA) survey show. It also shows young people are living with their parents longer.

The Melbourne Institute of Applied Economic and Social Research undertakes the survey every year. It’s Australia’s only nationally representative household longitudinal study, and has followed the same individuals and households since 2001.

The survey shows the rate of home ownership among 18 to 39 year olds declined from 36% in 2002 to 25% in 2014. In the same age group, the decline in home ownership has been largest for families with dependent children, falling from 56% to 39%.

Chart: Household Income and Labour Dynamics in Australia (HILDA) survey 2002 Source: HILDA

Even for those in this group who manage to buy a home, mortgage debt has risen dramatically. In 2002, 89% of home owners in this age range had mortgage debt. By 2014 this had risen to 94%.

Chart: Household Income and Labour Dynamics in Australia (HILDA) survey 2014 Source: HILDA

More significantly, the average home debt rose considerably. Expressed in December 2015 prices, average home debt grew from about A$169,000 in 2002 to about A$337,000 in 2014. Low interest rates since the global financial crisis have meant mortgage repayments for these home owners have remained manageable, but this group is very vulnerable to rate rises.

Chart: Home loan repayments – percentage ahead Source: HILDA

Detailed wealth data in the survey, collected every four years since 2002, show this increase in debt and decrease in ownership are part of a trend in the wider population. HILDA shows 65% of households were in owner-occupied dwellings in 2015, down from 69% in 2001.

Chart: Home loan repayments – percentage behind Source: HILDA

In fact, the decline in home ownership has been greater than the decline in owner-occupied households. This is largely because adult children are living with their parents for longer.

For example, the HILDA data show that the proportion of women aged 22 to 25 living with their parents rose from 28% in 2001 to 48% in 2015. For men this proportion rose from 42% to 60%.

Among those who manage to access the housing market, the data shows that the growth in home debt is not simply because they are borrowing more to purchase their home. A surprisingly high proportion of young home owners (between 30% and 40%) actually increase their debt from one year to the next, despite most of them remaining in the same home. Even over a four-year period – for example, from 2010 to 2014 – at least 40% of young home owners with a mortgage increase their nominal home debt.

Chart: From the Household Income and Labour Dynamics in Australia (HILDA) survey

The proportion of people with home debt that exceeds the value of their home – that is, negative equity – has also risen. In 2002, 2.4% of people had negative equity in their home; in 2014, 3.9% had negative equity. This is a relatively small proportion, but this could change as even small decreases in house prices will result in substantial increases in the prevalence of negative equity.

Home owners – How this changes with location, income and profession

In 2014, less than 20% of Sydneysiders aged 18 to 39 were home owners, compared with 36% or more in the ACT, urban Northern Territory and non-urban regions of Australia. To a significant extent this reflects differences across regions in house prices.

Sydney and Melbourne have particularly high house prices, while non-urban areas generally have comparatively low house prices. Regional differences in the incomes of 18 to 39 year olds also play a role.

Those with the highest home-ownership rates are professionals and, to a lesser extent, managers. They experienced relatively little decline in home ownership.

For workers in other occupations, home ownership has declined substantially. In 2014 home ownership was especially rare among community and personal services workers, sales workers and labourers.

This decline represents profound social change among this age group, where renting is increasingly becoming the dominant form of housing. In 2002, 61% of people aged 35 to 39 were home owners – a clear majority of their age group. By 2014, this proportion had fallen to 48%.

The changing housing situation of young adults is part of a broader change in the distribution of wealth in Australia. The HILDA Survey shows that differences in average wealth by age have grown since 2002. For example, in 2002, median net wealth of those aged 65 and over was 2.8 times that of people aged 25 to 34. In 2014, this ratio had increased to 4.5.

Chart: From the Household Income and Labour Dynamics in Australia (HILDA) survey

The decline in home ownership among young adults and this broader trend in wealth have implications for their long-term economic wellbeing and indeed for the retirement income system.

Even if house price growth moderates and many of those currently aged under 40 ultimately enter the housing market, it’s likely that a rising proportion will not have paid off the mortgage by the time they retire. It may be that many will resort to drawing on superannuation balances to repay home loans, in turn increasing demands on the Age Pension.

Author: Roger Wilkins, Professional Research Fellow and Deputy Director (Research), HILDA Survey, Melbourne INstructure of Applied Economic and Social Research, University of Melbourne

Further reading:

Australia’s City/Country Divide Is Not As Wide As You Might Think

Magnetic Island – Top Price Property Winner of the Week – 3-5 Endeavour Road – $520,000

Durie Is Out! Gay And Green Thumb Poster-Boy Snapped Duplicity Of Premier On Townsville Water Security

Veteran Diggers Fall Victim To National Housing Scheme Spruiker

First home buyers grant “pitted” by the Queensland Treasurer

Townsville sold out by PM Turnbull Smart City Deal

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Veteran Diggers fall victim to national housing scheme spruiker

Veteran Diggers that served in Iraq and Afghanistan have fallen victim to the lure of promised returns from National Rental Affordability Scheme (NRAS) residential housing projects promoted by a spruiker working on commissions with the National Australia Bank and property developers.

As many as two hundred Aussie veterans lost up to $160,000 each on NRAS property developments in Darwin promoted by ex-Royal Australian Navy diver, Mr. Hugh Ochremienko from the Gold Coast.

In a statement to the Herald Sun, the ex-navy diver said, “a citywide decline in prices and general delay in receiving government subsidies were offset by tax benefits built into the deals.”

Some Middle East war veterans including Officers and Special Air Service (SAS) personnel are deep in debt and reached into their superannuation funds to enter the deals.

Image: Mr. Ochremienko property investment planner at centre of Diggers fury Photo: David Clark – Herald Sun

Although the actions of Mr. Ochremienko are not illegal, he used his trust as an ex-serviceman to win the fellow soldiers business. “He claimed to be able to make their pay slips work for them, that he knew the system well so he could help them create wealth,” federal MP Andrew Hastie stated to the Herald Sun reporter.

Townsville soldiers were also targeted by the property development salesmen. He took them out for meals near Lavarack Barracks promoting cheap properties that were being subsidised by the federal government mainly in the outer suburbs of Darwin.

As the property market softened and the demand from tenants dropped, properties were left vacant in Darwin. A similar scenario occurred in Townsville with its record vacancy rates. In this horrific case of ‘buyers beware’, the soldiers had to wait up to 2 years for the government tax incentives to go through.

The NRAS investors struggled to sell and clear their mortgages because the property prices in the market had dropped and the balance of equity or loan to value would not cover their debts.

Mr. Ochremienko denied any responsibility and questioned whether the veterans had lost any money at all. “But have they really? I’m say no.” he said. The development middleman has not been licensed to offer financial advice since 2008 and said he helps investors with financial planning and his advice is general in nature.

Veteran investors appeal to come forward

Mr. John Rolfe, the reporter from the Herald Sun who broke the story asked if anyone knows more or has been affected to come forward.

TREN has broken similar stories in Townsville about the impact of NRAS and property spruikers luring unsuspecting investors into property developments that have damaged their financial history and even caused some people to file for bankruptcy.

We encourage people to come forward with any information. Do you have a story? Submit story.

Further reading:

Treasurer sparks free market concerns over Domain Central $6 million revamp

Turnbull federal budget could wipe out Townsville property owners

Bank fees in billions for home owners

Townsville sold out by PM Turnbull Smart City Deal

Guide to selling a luxury home

Guide to 22 knockout marketing tips to sell a home

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Battery Gigafactory Global Consortium Investigates Financial Viability of Townsville

Townsville City Council (TCC) has announced they are buying an equity stake in a global investment consortium using council land to build and operate a foreign owned $2 billion battery Gigafactory at Woodstock.

The Council owned land is 40 kilometres west of Townsville on 400 hectares that included the former CSIRO Lansdown research station.

Former senior executive of Macquarie Bank and Chairman of Boston Energy and Innovation (BEI), Mr. Bill Moss said "the consortium is committed to transforming Australia's energy supply."

A similar size battery "Gigafactory" is planned for New York state located at the Huron campus, the home of the computer hardware giant IBM.

The global players

Image: Boston Energy and Innovation (BEI) Chairman, Mr. Bill Moss
Photos thanks: The Australia

The major players in the Townsville Battery Gigafactory investment consortium include:

• Magnis Resources Limited
• Eastman Kodak Company
• C4V incorporated
• C&D Assembly incorporated
• TCC Development Corporation

In a statement to the Australian Stock Exchange (ASX), the consortiums Australian player, Magnis Resources said: "BEI is an ethical investment house specializing in the establishment of sustainable energy storage solutions in an environmentally sustainable manner to curb future energy problems faced by countries worldwide".

The TCC announced that a Memorandum of Understanding (MoU) was signed in April 2017 and that a "beneficial enterprise" development corporation has been established to legally share in the industrial development venture proposing the 15GWh battery manufacturing plant at Woodstock.

Economic benefits

"Townsville has increased the stakes to secure a state-of-the-art battery manufacturing plant and thousands of new jobs with a land offer that will deliver a major return for ratepayers," TCC reported.

The consortium estimates that the facility will create up to 1000 direct jobs and an additional 1000 in new jobs in direct support businesses and up to 5000 jobs in downstream original equipment manufacturing. The plant, once it is completed, could produce 250,000 car batteries per annum, 1 million home battery units or support 300 micro-grids to power small towns.

In an exclusive interview with the Townsville Bulletin, Cr. Hill stated: "the council was working closely with the consortium to meet its requirements for the project with land, power, transport links and workforce availability."

BEI Director, Mr. Corey Cooney said "We are also meeting with Minister Lynham as part of a push to create a new advanced manufacturing hub and smart technology and innovation base here in Townsville. We believe that a battery manufacturing plant is an anchor for that."

In a statement to Magnis Resources, Mr. Cooney said: "The consortium is committed to transforming Australia’s energy security by pledging the new batteries will be cost competitive, better performing, a sustainable supply chain, environmentally friendly and an alternative to current major energy suppliers."

Council land commitment

Ms. Young approved the announcement of the joint venture just this week 2 months after the MoU was signed and announced by the Australia/USA consortium on the New York Stock Exchange.

Image: TCC map of land proposed for Battery Gigafactory

"The TCC today approved a planning report recommending the council offer a portion of land at Woodstock for the proposal which is backed by a consortium led by BEI", the TCC press release stated.

"The land is part of the former CSIRO Lansdown research station, purchased by the council in 2002 to provide for future industrial uses.

The private investment consortium has been considering multiple sites proposed by TCC around the City requiring an area of at least 20 hectares. The 400 hectare Council owned site at Woodstock has rail transport, power and optic fibre services essential for a Gigafactory.

"Under the proposal, the Council would exchange the land for equity in the project that would be controlled under a specially set-up Council business entity and provide the city with an ongoing financial return," Ms. Young stated.

Reportedly a personal friend and mentor to TCC Chief Executive Officer Ms. Adele Young, Mr. Moss says these Gigafactories will be the "first of a series of proposed lithium-ion battery manufacturing hubs globally."

Battery energy and mining race

At least ten battery Gigafactories have been revealed in the past six months. Half a dozen have been planned in the last month across the world including the USA, Germany, Sweden, Hungry, Poland, China, Thailand and Australia in Townsville and Darwin.

Image: President Donald Trump Unleashing American Energy policy
Photo thanks: Hot Copper

The most aggressive player and inventor of the battery Gigafactory is the US billionaire and electric car manufacturer, Elon Musk who produces the Tesla car.

A global race for resources in cobalt and lithium is underway to supply the massive explosion in battery Gigafactories worldwide. Reducing the price of battery energy production and storage is critical to the global supply chain seeking cheaper electric cars and solar energy capture and storage solutions.

If the Queensland and Townsville governments are smart, they will position themselves in the negotiations with MoUs in hand from downstream manufacturing suppliers too.

A deal with an Aussie electric car maker or smart home manufacturing consortium, leveraging Australian engineering, could bring an unbreakable proposal to the global battery manufacturing consortium.

Critical to the plant's success is the anode material used in the manufacturing of Lithium-ion batteries.

Magnis Resources "plans to provide the materials from its Nachu graphite project in south-east Tanzania, which is planned to produce roughly 240,000 tonnes of graphite concentrate annually for a 15-year mine life from 2018."

Is the local leadership up to the task?

With such consumer demand making the offtake financing option key to the investment deal, competition across the globe for this new technology puts the leadership of Townsville in an extraordinary position of great opportunity.

From Townsville's perspective, focusing on stimulus jobs is a long game that builds on securing sustainable new age industries that could position the "Woodstock-Giru Valley" in the global gold rush for clean energy.

Image: Townsville City Mayor Cr. Jenny Hill
Photo thanks: Townsville Bulletin

The TCC land value equity stake could be the start of a portfolio of land/equity deals with an Australian owned and operated Tesla-like business model that could see the modern day Holden Ute back on the streets.

Selecting a suitable site showed the consortium behind the proposal the city was ready for business. “We have to make sure we keep the momentum going behind our negotiations and the fact that we now have a suitable site is a big step forward,” Cr. Hill said.

“The battery plant has the potential to create enormous economic benefits for the city and we are doing all we can to make it stack up.

“In addition to thousands of direct and indirect jobs, taking equity in the project in exchange for the value of the land will generate an on-going revenue stream for ratepayers.

“There is a still a long way to go in our negotiations, but the council is acting quickly to seize the opportunity.”

"In April, the council signed an exclusive MoU with a consortium led by BEI chairman Bill Moss AO which includes ASX Listed Magnis Resources and backed by US companies Eastman Kodak, C4V and C&D Assembly to investigate the financial viability of building a 15GWH battery manufacturing plant in the city," the TCC press release stated.

The consortium is investigating Townsville for the Gigafactory site "because of its infrastructure, location and it forward thinking council."

In a recent statement to the ASX, Mayor Cr. Hill's said, "This proposal if it comes off will be the biggest single stimulus for jobs and economic development in Townsville in decades".

"Townsville's economic fundamentals are strong and the hard work we're doing to sell the city's potential and attract potential investors is paying off and was the reason the consortium has come to the city," Cr. Hill said.

The Gigafactory plant could be operational in just 3 years supplying the car, home energy and utility battery markets but the Townsville bid is still competing with a site in the Northern Territory.

Further reading:

Corporatocracy Officially Launched by Secure Private Capital

Townsville sold out by PM Turnbull Smart City Deal

Turnbull Trio Caught with smoking gun – Townsville Smart City Deal’s Catastrophic Legacy

Townsville Smart City Deal Exposed as National Security Threat

Guide to selling a luxury home

Guide to 22 knockout marketing tips to sell a home

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Corporatocracy officially launched by Council to secure private capital

Image: Woman protecting for Democracy

Council or corporatocracy?

Corporatocracy has officially arrived in North Queensland helping the Townsville City Council (TCC) to gain renewed energy and purpose in creating economic opportunities for the City.

The official announcement this week by the local government authority has created a development corporation so as to take advantage of private capital interests seeking joint ventures with the TCC on infrastructure, community services and industrial ventures.

Development corporations are legal entities just like any other Australian corporation. The entity is controlled by a Board of Directors that have been defined as a "beneficial enterprise" under state government legislation.

"Townsville City Council has approved the creation of a development corporation to unlock council owned land for development and economic activation.” Ms. Adele Young, TCC Chief Executive Officer, said in an official press release.

It's the Law

Queensland law provides authority to local governments to form private partnerships and leverage council assets for commercial and public interests.

"The Townsville development corporation will be established in line with the provisions for councils to form beneficial enterprises under the Local Government Act 2009," Ms. Young's statement said.

"Under the arrangements, strategic sites will be transferred to the development corporation which will negotiate land use developments of sites based on business cases approved by the development corporation board and council.

"The make-up of the board will comprise the Mayor, council’s Chief Executive Officer, Chief Financial Officer and Director of Planning and two independent directors who will be confirmed in coming weeks," The TCC stated.

What is the purpose?

Mayor Cr. Jenny Hill said the enterprise body would be similar to successful development corporations created by other councils in Queensland to generate new projects and investment.

"The decision fulfils a council election promise and meets a commitment in the Townsville City Deal agreement with the Australian and Queensland Governments to establish the special entity by June 30.

“The development corporation will be driving force behind unlocking the potential of prime council owned land in the Townsville PDA to stimulate investment, construction and jobs,” Cr Hill said.

“It will open up major new opportunities for public and private investment in and potentially even partnerships.

“This is an initiative that I have championed for some time now to free up sites in the PDA like the former northern rail yards to exciting and innovative development," Cr. Hill stated.

Community interests

“The council has consulted with business, community leaders and the State Government, and is now proceeding with the proposal after receiving widespread support.

“As the owner of the land, the council will maintain control over any decisions on behalf of the community.

“By establishing the development corporation, the city will have a dedicated public entity with the sole purpose of activating council owned land in the Townsville PDA and other strategic areas," the TCC press release reported.

Academic opinion

Famous American economist, Edmund Philps, winner of the 2006 Nobel Memorial Prize for Economic Sciences, said in his analysis of Corporatisation that “the cause of income inequality is not free market capitalism, but instead the result of the rise of corporatization acting with complicit state institutions in ways that discourage (or block) the natural workings of a free economy.”

Even though Cr. Hill has stated she had been wanting the development corporation for some time, the catalyst for the creation of the corporate entity is for the TCC to become a player in the global consortium of investigating the financial viability of the Townsville Battery Gigafactory at Woodstock, 40 kilometres west of Townsville.

Further reading:

Battery Gigafactory global consortium investigates financial viability of Townsville

Bust the Regional City Myths and Look Beyond the “Big 5” For A $378b Return

First home buyers grant “Pitted” by Queensland Treasurer

Guide to selling a luxury home

Guide to 22 knockout marketing tips to sell a home

Recipe Favourite – Chocolate and Caramel Give it a Crack

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