The great Aussie home ownership dream is in decline

Despite declining interest rates, Australians are at risk of being unable to pay off their mortgages as property values skyrocket and borrowing levels intensify.

In fact, mortgage debt has nearly doubled in the last eight years, according to finder.com.au.

"The great Australian dream of owning your own home is in decline... and renting is on the rise," according to Roy Morgan Research CEO Michele Levine.

Also read: This is how many years it takes to save for a first-home deposit

Roy Morgan's State of the Nation report reveals there's almost a trillion dollars of debt owing to mortgages.

Levine highlighted two primary areas of financial risk that form the basis of the findings for its 2016 report.

"There are lots of things that relate to financial risk; whether it's how legislation changes things, Malcolm Turnbull, the stock market, business and consumer confidence, Australia's ageing population, superannuation... all of these are inextricably intertwined," Levine said.

"However, we wanted to focus on two buckets of issues. Mortgage stress - likely the biggest debt that households take on board - and investment stress - pertaining particularly to retirement."

Mortgage stress

While the proportion of Australians with a mortgage has remained steady at around 30% of the population, Levine says rising property prices and increased borrowing levels have contributed to greater debt and heightened "mortgage stress" among home owners.

"The amount of mortgage debt in Australia has nearly doubled in the last eight years," Levine said.

"The median value of properties across Australia has risen by about 33% since the global financial crisis in 2008, the amount borrowed has gone up by about 41%, and it seems there's no great hurry to pay it off."

Also read: The real reason first-time buyers are being locked out the property market

When comparing average household incomes and median home prices in 2016, rising costs outpace salaries. Between 2008 and 2013-14, these figures escalated at around the same rate, according to the report.

However, the recent reductions in interest rates has somewhat counterbalanced "mortgage stress" - the ability to pay off your loan, based on your income and the agreed repayment amount, finder.com.au said.

18.4% of all owner-occupied mortgage holders are "at risk" of being unable to repay their home loan, while 13.9% are "extremely at risk".

The analysis identifies income as the underlying, key driver of mortgage stress.

83% of households with an income under $60,000 are "at risk" of being unable to pay off their mortgage, while 69% aren't even able to pay the interest.

Also read: Here's why the real estate industry could be set to change

"A dual income household losing one income has a substantially greater impact on mortgage stress than the interest rate doubling," Levine said.

The median mortgage is highest in Sydney at $301,000. In Perth it's $284,000, in Melbourne $269,000 and in country Tasmania just $139,000.

"And where are the highest levels of mortgage stress? In country Tasmania," Levine said.

Investment stress

Eight years ago, the population was retiring with a median gross wealth of $164,000, according to the report.

In 2016 more than 52% of the population are retiring with a median gross wealth of $250,000. This growth has been generated by pensions and superannuation, not other investments.

"To retire and live comfortably the generally recommended figure is about $542,000 for individuals and about $640,000 for couples," Levine said.

"So while superannuation has made a big contribution to the improvement in people's financial situation when they have retired, we're still nowhere near the recommended levels," Levine said.

Also read: Why Australian commercial property looks a good investment

Australian superannuation assets increased to $2.1 trillion at the end of June 2016, however, net contribution flows decreased 13.9% year-on-year to $34 billion.

It's tough to make long-term gains when rates are edging towards zero and expectations are for lower returns.

So the comparison site suggests that Aussies which haven't been deterred and are still keen on buying a new home or investment property, should take the time to compare a range of home loans to find the best possible rate.