Australian homeowners are holding onto their properties for longer than they were a decade ago and it’s not necessarily because they are comfortable. Experts say rising house prices and transactional costs as well as an ageing population are key reasons why Australians are staying put for longer.
A new analysis by realestate.com.au shows the average hold time across both houses and units is 2.6 years longer than it was 10 years ago, currently 10.6 years for houses (8.0 years in 2010) and 9.5 years for units (6.9 years in 2010).
Realestate.com.au’s executive manager of economic research Cameron Kusher said the upward trend in hold times comes down to the fact that moving home is expensive.
“Property prices are so high now, and the costs associated with buying and selling properties are also high, which dissuade transactions wherever possible,” Mr Kusher said.
Program director for household finances at the Grattan Institute Brendan Coates said the rising burden of stamp duty is a clear driver for longer hold periods.
“[Stamp duty] is a really large cost now compared to the average wage [and] because house prices have risen relative to incomes over the last two decades – and the stamp duty rates obviously rise with prices – it means that Australians are spending a larger share of their average wage every time they change houses. So naturally that means that you do it less often,” Mr Coates said.
“Stamp duty rates have basically doubled [over the past 15 years] in Melbourne and Sydney. That’s a really enormous impost on households … It means people are probably living in housing that less suits their needs.”
On Tuesday, the NSW government announced a public consultation process to seek the community’s view on tax reform to reduce the upfront costs for home buyers. Under the plan, the community will be asked if they want the state’s stamp duty system overhauled to allow buyers to opt out of stamp duty and instead choose a smaller annual property tax.
NSW Treasurer Dominic Perrottet said the current stamp duty system was centuries old and in need of an overhaul to give NSW residents a modern tax system.
“This is a reform proposal for NSW where more people can own their home and have more freedom to choose the right property for their family at every stage of life,” Mr Perrottet said.
The NSW reform could be set in motion in the second half of 2021.
But for now, Mr Coates said many Australian home owners are choosing the more affordable option of renovating their homes to make them more suitable, rather than selling up and buying again. He said Australia’s ageing population is another reason for a decline in property transactions compared to a decade ago.
“The average homeowner is older … older households have a tendency to move less frequently.”
Mr Kusher added that pensioners are particularly less inclined to move homes.
“Household wealth is underpinned by real estate assets so downsizing has become somewhat less attractive, especially considering it can impact on pension payments for retirees,” he said.
The realestate.com.au data showed average hold periods for houses in Australian capital cities increased steadily between February 2010 and August 2019, when they began levelling out in most cities, declining slightly in Melbourne and Sydney. It was a similar pattern for units although hold times levelled out in the two east coast capitals.
Mr Kusher said the drop-off was likely associated with a weaker housing market and subsequent price falls over recent years, as well as low borrowing costs.
“This may have encouraged people to move due to the lower mortgage costs despite the sale and purchase costs that they had to incur,” he said.
Hold periods for houses in all capital city regions except the ACT decreased in May 2020, shortly after COVID-19 lockdowns in Australia. Hold times for units in the ACT also increased but decreased everywhere else except in Melbourne, Sydney and Hobart where they remained steady.
Mr Kusher said the ongoing fall in mortgage rates, which have led to better mortgage serviceability, have likely driven more people to transact on homes in recent months.
While Australian home owners are staying in their homes for longer, hold times vary wildly across the country.
The suburb with the longest hold time nationally was Taren Point in Sydney’s south with an average hold time of 22.7 years for houses. The longest hold time for units nationally was in Kew East in Melbourne with an average of 18.8 years.
In Melbourne, the inner northern suburb of Princes Hill was where houses were held for the longest period of time at 21.7 years compared to Melton West, which had the shortest hold time for houses at five years. For units, Kew East had the longest average hold time of 18.8 years while Laverton had the shortest at 3.7 years.
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