Homeownership has long been thought of as the great Australian dream. For individuals, it’s seen as the path to adulthood and prosperity. For the nation, it’s seen as a cornerstone of economic and social policy.

Implicit in this is the assumption that owning a home rather than renting one makes people better off.

It’s an assumption we are now able to examine using data from the government-funded Household, Income and Labour Dynamics in Australia (HILDA) survey, which for two decades has asked questions both about homeownership and satisfaction with life.

The overarching question asks

all things considered, how satisfied are you with your life? Pick a number between 0 and 10 to indicate how satisfied you are

We also looked at people’s satisfaction with their financial situation, their home and the neighbourhood in which they live.

In a study published in the journal Urban Studies, we linked those answers to home ownership and characteristics including age and income.

As expected, we found homeowners were generally more satisfied with their lives than renters. But we also find the extent to which they were more satisfied depended on whether or not they were still paying off a mortgage.

Mortgaged homeowners about as satisfied as renters​

Outright home owners were 1.5 times as likely to report high overall satisfaction as renters. But home owners still paying off a mortgage were only a little more likely to feel high overall satisfaction.

Similarly, outright owners were 2.3 times as likely to report high financial satisfaction as renters – but mortgaged owners were only 1.1 times as likely.

When it comes to satisfaction with their home and neighbourhood, the differences were less extreme.

Outright home owners were 3.1 times as likely to report high satisfaction with their home as renters, while mortgaged owners were 2.8 times as likely.

Outright owners were 1.6 times as likely to report high satisfaction with their neighbourhood as renters, and mortgaged owners 1.4 times as likely.

The results also varied with age and income.

Financial satisfaction relative to renters by age​

1= high satisfaction as likely, 2 = high satisfaction twice as likely

​

As shown in the graph above, outright owners were more likely to report high financial satisfaction than renters across almost the entire age range.

But mortgaged owners only showed a demonstrably greater financial satisfaction than renters between the ages of 25 and 50.

Beyond age 50, the existence of a mortgage debt burden appeared to cancel out any boost to financial satisfaction from homeownership. This potentially reflects the growing financial stress of making mortgage payments as retirement approaches.

Financial satisfaction relative to renters by income​

1= high satisfaction as likely, 2 = high satisfaction twice as likely

​

By income, mortgaged owners reported experiencing more financial satisfaction compared to renters the more they earned between A$80,000 and A$240,000. Outright owners experienced more financial satisfaction than renters up to A$320,000.

Beyond these income levels, owners did not have greater financial satisfaction than renters, perhaps because high-earning renters have other sources of financial satisfaction.

How satisfied people feel beyond 60​

In other respects, outright owners and mortgaged homeowners showed similar patterns, becoming more satisfied with their homes relative to renters the more they age up – until the age of 60. That’s when their satisfaction relative to renters declined, as illustrated below.

This decline might reflect the growing physical burden of maintaining an owned home as people age.

Satisfaction with home relative to renters by age​

1= high satisfaction as likely, 2 = high satisfaction twice as likely

​

Our study has important implications. One is that age matters.

Although older people consistently express a desire to age in place, we found satisfaction among those who owned vs rented their home declined beyond age 60. This suggests better integration between housing and care is critical to support people ageing in place.

Another implication is that as low-income owners are more reliant on their homes as a source of relative financial satisfaction than high earners, they are more exposed in times of crisis. They may face the risk of being forced to sell suddenly with little time to consider the consequences.

And another implication is as the relative financial satisfaction of mortgage holders disappears after the age of 50, and as more of us approach retirement with mortgages intact, more of us will either postpone retirement or become dissatisfied.

Our findings suggest the extension of mortgage debt into later life should be discouraged if the benefits of the Australian dream are to be preserved.

This article was first published on The Conversation, and was written by, Rachel Ong ViforJ, ARC Future Fellow & Professor of Economics, Curtin University, Hiroaki Suenaga, Senior Lecturer School of Accounting, Economics and Finance, Curtin University, Ryan Brierty, PhD candidate, School of Accounting, Economics and Finance, Curtin University

 

[Marvin Kombi]

Well, of course paying off a home is just as difficult as paying rent, however when your mortgage is paid off you own it and no longer need to come up with the money, especially in retirement. What do renters do when they retire? Still pay rent?? With what??? Their pension or superannuation???? Or perhaps they move in with family? A bit uncomfortable (for most). No, my advice is this: spend your teens and twenties saving like mad for a deposit, then buy a property. By the time you’re 60 you’ll own it outright! Happy retirement!
I am 62, married with 3 adult children and 2 grandchildren. We have just finished paying off our mortgage but the past few years have been hard as my wife had a stroke forcing her to give up work and go on a disability pension. I also had to give up work to care for her and receive a carers pension. We have struggled to pay the mortgage but, by the grace of God, we finally made it and are now mortgage free. I shudder to think what we’d have done if we were renters.
So, now! Is renting still better than paying a mortgage???

 

[MariaG]

We worked our freckels off to get our mortgage paid off.
Like Marvin, toward the end it was hard because hubby had a life changing accident, but we made it happen.
The way for us was to only go after the basics, no bells and whistles, kept the borrowed amount, and term of loan down, then by gum, we did it. I too was on a carers pension, but you do what you have to do.
The feeling when you own your home is amazing.
The thought of having to pay rent until I die is cringeworthy.
I feel sad for people today who are struggling to find a decent place to rent. A lot of people must be at their wits end.
Things need to change, including prices charged by developers.

 

[Dennis]

I my wife and 3 yr. son arrived in Australia in 1958 as ten pound Poms, We had a bit of a start as my elder sister, my Mother and my brother lived here, we had been nominated by my brother one of the regulations was if necessary they had to provide accommodation for 6 months, my sister]s husband thought he had a job for me at the cement works but 2 of us applied for the job and the other had concrete experience so he got the job this was the first week of us being in Australis, on the Wednesday I went down to the local employment place now called Centrelink and registered and they said they had nothing for me but to go in next day, when I went in next day they said there is A job down the road for a fortnight do you want it, I said yes and went straight down for an interview, they said I had the job could I start the next day, I said give me time to go home to get my overalls and I will be back this afternoon, I got a 4 hour shift in, to cut the story short those 2 week turned into 14 yrs. Whilst I was working my wife would go out with my son looking for a rented place after 2 weeks she found a place about 10 mins away from my workplace a few weeks later they wanted a girl in the Office and has my wife had plenty of experience she got the job, My mother came to live with us to look after my son and then we started to look for a block of land, we bought A 1/4 acre block of land For 750 pounds which took 2 yrs then we built a weatherboard house, later I was transferred to Adelaide where we bought a block of land and built an House, when our 3 children left home we sold the house and bought the place I live in Now we paid this house off when I was 60 and now I live on my own after losing my wife.
I find I can comfortably live on my Pension where I would be struggling if Renting.

 

[mylittletibbies]

Well, of course paying off a home is just as difficult as paying rent, however when your mortgage is paid off you own it and no longer need to come up with the money, especially in retirement. What do renters do when they retire? Still pay rent?? With what??? Their pension or superannuation???? Or perhaps they move in with family? A bit uncomfortable (for most). No, my advice is this: spend your teens and twenties saving like mad for a deposit, then buy a property. By the time you’re 60 you’ll own it outright! Happy retirement!
I am 62, married with 3 adult children and 2 grandchildren. We have just finished paying off our mortgage but the past few years have been hard as my wife had a stroke forcing her to give up work and go on a disability pension. I also had to give up work to care for her and receive a carers pension. We have struggled to pay the mortgage but, by the grace of God, we finally made it and are now mortgage free. I shudder to think what we’d have done if we were renters.
So, now! Is renting still better than paying a mortgage???

I totally agree, owning your own home by the time you retire, IMO,is of the utmost importance.Rents are so high these days the entire pension isn't enough for the rent, let alone food, electricity etc.

 

[Ezzy]

Agree that owning your own home in retirement is a big bonus.

I needed to take redundancy @ 43 years of age due to work injuries, then a DSP & finally became a 65 y.o. pensioner.

The only way we could manage paying off this home was, when after a few years in this home & struggling, our eldest daughter suggested she become a proportionate owner, which was agreed to thereby taking pressure off us & making us home owners in our portion of this home. We share any maintenance costs by proportion of our ownership as well as rates, insurances etc. Definitely a win win situation as our daughter has no desire to marry & so now after our deaths she has a portion of the home plus a1/4 share of the balance after the sale of this home.