RDP 2005-03: Property Owners in Australia: A Snapshot 4. Conclusions

This paper has examined empirically the role of household characteristics for property ownership and gearing choices in Australia. Three main groups of characteristics were considered, relating to the life cycle, affordability and household composition. The results for Australia presented in this paper concord with previous studies on the influence of these factors on households' real estate decisions both in Australia and in other countries.

Overall, the models for ownership and gearing choices suggest that life-cycle considerations, especially those measured by age, are very important explanatory factors. The decision to hold debt appears heavily influenced by the life cycle. The same is true for the current extent of gearing, reflecting the importance of the passive progression of the household's mortgage contract towards repayment as households get older. While the life cycle also plays an important role in the choice to own owner-occupied or other residential property, the value stored in these forms of property is largely independent of age.

Affordability characteristics, especially those that affect access to mortgage finance, such as income, wealth and employment status, are also clearly important factors in the ownership and gearing choices of households. The results highlight that affordability characteristics are at least as important as life-cycle considerations for the ownership and value decisions for the household's property portfolio. This is particularly the case for the value of property owned, which is largely determined by the income and non-housing wealth held by the household. While the propensity to hold debt is influenced by income and wealth in line with the results found for other countries, these factors are not as important for the gearing ratio chosen by the household, which is dictated more by the stage of the life cycle.

Household composition appears to be of significant influence in the choices made regarding owner-occupied housing. The results of this study concur with previous evidence from Australia on the importance of marital status and household-type considerations in the tenure choice of households. While some factors related to household composition influence choices concerning investment property, they are far less important than either life-cycle or affordability characteristics.