The Australian Dream of owning a home is becoming increasingly elusive, and if current real estate trends persist, it could remain out of reach for many for decades to come.
The stark reality is that Australians could be waiting more than 70 years for affordable housing if property values follow the ‘sustainable growth’ trajectory championed by the major political parties.
Labor and the Coalition have recently unveiled policies aimed at addressing the deepening housing affordability crisis.
However, both sides have shied away from the notion of declining house prices. Instead, they have endorsed the idea of ‘sustainable’ price growth, where affordability is theoretically restored as incomes rise faster than property values. But is this approach realistic, or merely a pipe dream?
During the second leaders’ debate, Opposition Leader Peter Dutton expressed his desire for steady increases in home prices: ‘Our plan is to get our country back on track to help young Australians realise the dream of home ownership again.’
Prime Minister Anthony Albanese, while avoiding a direct answer on whether he wishes for prices to drop, emphasised the goal of making home ownership more accessible.
The concept of ‘sustainable’ growth in house prices is appealing on the surface, but independent economist Saul Eslake warns that it’s a misleading proposition.
A simple analysis reveals the daunting truth: at the end of last year, the median house price in a capital city was 12.8 times the average adult Australian’s annual income.
This is a significant jump from the turn of the century, when the median house price was only 6.5 times the average income.
If we assume that home values will increase at the Reserve Bank’s inflation target of 2.5 per cent and wages grow by 3.5 per cent annually, it would take a staggering 70 years for the house price-to-income ratio to revert to its 2000 levels.
This bipartisan approach to solving the housing affordability issue essentially means waiting until the end of the century to regain the affordability of the past.
The Greens leader, Adam Bandt, offers a slightly different take on the sustainable growth solution, suggesting that a period of stagnant house prices could allow wages to catch up.
‘We think having house prices stay the same for a while to give wages a chance to catch up is a reasonable compromise that will give first home buyers and renters some hope.’
However, even in this optimistic scenario, it would take 20 years to restore affordability to early 2000 levels.
Eslake points out that while a rapid decline in house prices could have negative economic impacts, ‘But what would be wrong with a 5-10% fall in house prices over a three-year period? That would do more to boost affordability than anything any government has done in the past 60 years.’
Yet, such an outcome is challenging to orchestrate through government policy, especially when past efforts have often involved measures that inadvertently bolster high prices, such as first homeowner grants.
Cameron Kusher, an independent property expert, highlights the complexity of the issue, noting that Australians have grown accustomed to accumulating wealth through property ownership. Changing this mindset is no small feat.
‘We’ve become accustomed to the idea that the way you get wealthy in Australia is you buy and hold property, and get wealthier over time. It will take a big shift in mindset to change that.’
Kusher suggests that creating more homes at lower price points, particularly through an increase in apartment construction, could be part of the solution, as seen in Auckland’s successful rezoning efforts.
The current situation is disheartening for Australians dreaming of owning a home. For many, the dream of a standalone house with a backyard is becoming a relic of the past.
The housing market’s trajectory suggests that without significant policy changes and a shift in societal attitudes, the path to homeownership will remain fraught with obstacles.
As we grapple with these challenges, it’s essential to engage in a national conversation about the future of housing in Australia. What kind of society do we want to build? How can we ensure that the Australian Dream is not reserved for a privileged few but is attainable for all who aspire to it?
We invite you, our readers, to share your thoughts and experiences. Have you felt the pinch of rising house prices? What solutions do you believe could make a difference in creating a more affordable housing market? Join the discussion and let us know in the comments below. Your insights are valuable as we navigate this complex issue together.
Also read: Heartbreaking waterfront photo sparks housing crisis alarm
