Two academics have argued that many Australian property owners have been left in an unstable financial position following the strong capital growth seen in markets across Australia in recent years.

In their submission to a federal government’s inquiry into home ownership, Emeritus Professor Gavin Wood from RMIT Univesity’s Centre for Urban Research and Associate Professor Rachel Ong from Curtin University’s Bankwest Curtin Economics Centre believe that many Australians have left their financial and housing futures in precarious state.

“The large capital gains that have accrued to most Australian home owners over the past two decades or so has prompted large scale withdrawals of housing equity, which leave some home owners with high levels of debt secured against the family home,” Wood and Ong said in their submission.

“These home owners are banking on rising house prices and increasing incomes, an increasingly risky proposition in the current financial and economic environment,” Wood and Ong said.

While many investors may have used withdrawn property equity to expand their portfolios, Wood and Ong argue that as that as government welfare initiatives, such as the pension, either stagnate or decrease many people are leveraging their homes to cover immediate spending needs.

“In Australia the retreat of the welfare state has also been accompanied by an increased reliance on asset-based welfare that involves the leverage of housing and other personal assets to meet acute spending needs and unanticipated drops in income,” they wrote.

“The welfare role of housing wealth has grown and now reaches into earlier stages of the life course. Younger Australians, and particularly couples with children, have been using flexible mortgages to tap into housing equity to meet pressing spending needs.”

As this becomes more prevalent, the two professors argue that for many people the once typical Australian model of home ownership is now defunct.

“This submission argues that the housing career featuring a smooth passageway from the parental home in youth to outright ownership in retirement is over for many Australians.

“Real house prices are being pushed up to levels which require buyers to take on large amounts of debt that are repaid later in the life course.”