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Is 'The Great Australian Dream' a sham?

In his Budget reply address, Opposition Leader, Peter Dutton, announced a pledge to “restore the Australian dream" of home ownership.

As Australia deals with a chronic housing shortage, soaring prices and a rental crisis, Dutton unveiled a host of changes to the migration system to help with the problems.

He said that from mid next year, a Coalition government would reduce the permanent migration program to 140,000. The program would then increase to 150,000 in its third year, before climbing to 160,000 in year four.

“We believe that by rebalancing the migration program and taking decisive action on the housing crisis, the Coalition would free up more than 100,000 additional homes over the next five years,” Dutton said.

“The great Australian aspiration of home ownership has become out of reach for so many,” he said.

“But I will never accept a situation where the only people who can afford to buy a home are people with rich parents.”

If you’re cynical about Dutton’s pledge, perhaps you have the right to be. Because in the same speech, he also reiterated a policy to allow Australians access to up to $50,000 of their super to buy their first home.

So, it seems that while he wants to reduce housing demand through migration cuts, he also wants to increase demand by allowing people to use their super to buy a home. Go figure.

The origins of The Great Australian Dream

The speech got me wondering about what this idea of 'The Australian Dream' or 'The Great Australian Dream' is, how it originated, and whether it’s still as relevant today. Peter Dutton clearly thinks it is relevant and he’s betting an election on it.

Firstly, what is the dream? It can simply mean, as Dutton stated: home ownership. In folklore, it’s owning a detached home on a large suburban block, with a backyard, and a barbecue and hills hoist to boot.

Yet, the dream is probably less about the house itself, and more to do with what it represents: success, security, and a better life.

And where did the phrase come? One theory is that it derives from the American Dream. In the US, the dream is associated with upward social mobility. The Great Australian Dream is more specific than that though, as it’s focuses on home ownership as a means to prosperity.

The Australian version is a relatively recent one. It only started to appear in the 1950s as home ownership blossomed following World War Two. Interestingly, the dream was initially ridiculed in the arts, in the paintings of John Brack in the 1950s, the famous novel My Brother Jack in 1964, and Robin Boyd’s architectural critique, The Australian Ugliness.

The idea gained steam in the 1980s as house prices took off. This was reflected in TV shows depicting The Great Australian Dream like Neighbours and Kingswood Country. Then, in 1997, came the movie, The Castle.

“It’s just the vibe of the thing”

Many consider The Castle to be the quintessential Australian movie. It follows Darryl Kerrigan’s fight to save his family home from being compulsorily acquired to make way for an airport expansion. Against the odds, Darryl, driven by his conviction that what he owns is not simply a house but a home, takes his fight all the way to the High Court.

The movie’s popularity, then and now, stems from it being almost a love letter to home ownership and The Great Australian Dream.

Yet, having rewatched the movie recently, I can’t help but wonder if its sentiments remain as powerful now as they did back then. Darryl and his wife, Sal, were able to buy their house in the early 1980s for a “steal” at $70,000. Today, the exact same property in Melbourne’s north is reported to be worth more than $1.4 million. Back then, house prices were 2.8 times average incomes, compared to close to 10 times now. And Darryl was able to buy his home on a single tow truck driver income, which would be a lot harder, if not impossible, to do today.

What the dream means now

Clearly, The Great Australian Dream remains a powerful idea today. Peter Dutton and every other politician knows there’s votes in it and continue to pander to that at every turn.

In a recent Firstlinks article, Graham Hand reflected on why houses seem to be changing hands at ever-ridiculous prices. He thinks there may be a few reasons. First, borrowers are willing to increase their loans with the bank, almost to whatever limit is allowed to secure a home. Second, the increase in the role of the Bank of Mum and Dad has changed the market. Third, it is becoming more common for mutigenerational families to buy and live together. Fourth is the other side of the generosity of grandparents. They may delay retirement beyond 60 or 65 by one of them working longer, perhaps while the other looks after the grandchildren.

There’s some merit to these thoughts. More broadly, they show the lengths that people are going to in order to buy a home, and the risks they’re willing to take – all in the name of achieving The Great Australian Dream.

Does it need tweaking?

The question is whether it’s still a dream worth pursuing? If house prices go nowhere for 20 years, would it still be considered The Great Australian Dream? Are there other ways that we should be measuring success and prosperity? Are there better dreams to target? Should we be looking at alternative ways to get wealthy? Should governments be promoting these other methods to get prosperous?

The current debate on housing is dominated by suggestions on making property more affordable for the young. It's an important issue. Yet, just as important may be broadening the debate to include different ways to define success both for ourselves and the country as a whole.


James Gruber is an assistant editor at Firstlinks and


Wolfgang McGuinness
June 06, 2024

I think pretty much everyone has fundamental misunderstanding of why Australian property prices are so high.

Everybody wants prices to go higher.

And the people who most want prices to continue to grow are not the wealthy, but those trying to buy their first home.

Would you scrimp and save and lock yourself into decades of debt if you thought there was a risk your property would be worth less than you paid?

Of course not.

The attraction of property for pretty much everyone in Australia is not its function, but its constant increase in value.

The ideal scenario for every first home buyer is that they get an affordable property (for them) and then the price zooms up so the next family pays more.

This is why Dutton and Albo are talking nonsense. They may be smart enough to know it, but maybe not.

There are two ways to make houses affordable for average folk. You can pay them a lot more.

Or you can make houses worth less than they currently are.

If you do the latter, everyone who currently owns a house will hate you for reducing the wealth they thought sacrosanct. And those who don’t own a house won’t want one because they are no longer guaranteed wealth.

June 06, 2024

"There are two ways to make houses affordable for average folk.
You can pay them a lot more.
Or you can make houses worth less than they currently are.":

Can do both simultaneously by allowing real net interest rates to remain positive for a few decades.
Saving then pays more than housing speculation.

Steve Dodds
June 06, 2024

I despair at the rose-tinted talk of Australian housing and the Great Australian Dream.

Australian housing abandoned its purported role as a provider of secure shelter decades ago.

Not just encouraged, but subsidized by successive governments it is now primarily a mechanism for tax-free wealth creation.

Look at the most recent data on property holding times. The shortest period of ownership correlates directly to affordability. So people are not buying for a place to live, but as the first step on a wealth ladder.

After 3 years (average holding time) they sell and use the tax-free capital gain to buy a more expensive home. And again and again.

And because everyone is doing this, and because everyone believes property always goes up, and because the government backstops the ladder, it is this competition that drives the average cost of housing up.

Affordable/first home buyers homes haven’t gone up at anything close to the ‘median’.

Take Sydney. The biggest price growth isn’t where first home seekers hunt. It is in the inner city.

Prices for an average 3 bedroom Inner West abode are perilously close to $2.5M. A 20% deposit would require paying $120,000 a year just to service the mortgage. So you need an income of around $450k.

But of course people aren’t borrowing. They are using their government subsidised free capital gain. There’s a reason the CGT exemption is the biggest tax lurk in the budget. Costing more than helth, education and defense combined.

Australian property is a Ponzi scheme where prices go up because everyone believes they will always go up. The property section of the news sites always has a story on Saturday afternoon about someone who finally succeeded in buying a house by paying hundreds of thousands more than anyone thought it was worth.

This behavior would be treated as insane were it applied to shares. And is indeed scoffed at with Bitcoin, NFT etc etc.

But governments are so scared of losing office they continue to everything they can to support those who are on the property wealth ladder whilst pretending they aren’t.

Want to reduce the cost of the Australian secondary market? It’s easy. Just make it less enticing as an investment. Put it at the same level as every other method of wealth creation.

Remove the CGT exemption. Remove the means testing exemptions which allow someone with a $10 Million asset to get a pension.

Historically shares show better growth than property. But with the tax and other advantages of property you’d be an idiot not to take advantage.

Australian property is by definition affordable because people are still merrily buying it.

And ‘affordable’ housing is still well within reach of average income earners.

But Dutton’s (and Albo’s) deliberately disingenuous nonsense isn’t achievable by reducing migration or by building more cheap houses.

It requires collapsing the price of the entire property market.

June 06, 2024

"It requires collapsing the price of the entire property market.":

It does. And all it takes is for real net interest rates to be expected to be positive for a decade or two so that risk free saving is more profitable than using other people's money to speculate on home prices.
= (1 + 5% * (1 - 31.5%)) / (1 + 3.6%) - 1
= -0.17%

Mortgages result in the housing market being sensitively geared to real net interest rates.

James Gruber
June 06, 2024

Hi Steve,

Property holding times - do you where I cna find data on that?



Christoph Eisner
June 05, 2024

With an increasing population on a fixed set of land and resources you would expect prices for homes to increase above inflation and possibly median incomes, however the recent increases are well above an appropriate rate for that. A reason that hasn’t attracted a lot of attention here is the cost of new builds. Councils and governments have caused huge increases in costs through their regulation and fees through ever higher specifications for safety, energy and environment. Further the local cost of a productive hour worked has increased out of proportion through regulation and overheads. Our wages didn’t need to keep up with this, since a increasing portion of our consumption is imported from lower cost countries. There are limits to increasing the imported content of new houses at the same rate than for most other things. Unless the cost of new builds is seriously addressed by councils and governments it is difficult to see current trends to be reversed.

George B
June 06, 2024

$100k + lollipop holders says it all

June 04, 2024

"The landlord who happens to own a plot of land on the outskirts of a great city … watches the busy population around him making the city larger, richer, more convenient. .. and all the while sits and does nothing. Roads are made … services are improved … water is brought from reservoirs one hundred miles off in the mountains and -all the while the landlord sits still … To not one of these improvements does the landlord monopolist contribute and yet by every one of them the value of his land is enhanced … At last the land becomes ripe for sale – that means the price is too tempting to be resisted any longer … In fact you may say that the unearned increment … is reaped by the land monopolist in exact proportion not to the service, but to the disservice done."

-Winston Churchill during debates on the Finance Act 1910

June 06, 2024

RE :...To not one of these improvements does the landlord monopolist contribute .....: This statement is clearly wrong. The property owner would be paying increased taxes ( Council rates, water and sewerage connection (availability fee)? and most likely land tax ) as the property valuation rises. These fees would be for something that is unused. by the non existent residents of the land......

June 07, 2024

Peter J, agree, & for others if interested... if a statement by Churchill 1910 he clearly was wrong, I can attest re 'plot of land' as above presumably UK 1910. Share of family land handed down in UK still now as was, 3 generations no heart to sell as volunteered by owner public access lane across it to a mountain from about 1900 of seen records, rates /whatever called then & water first piped nearby. Land large so huge rates cos have seen them. Council would be in trouble with public if access ever denied which is legal to be done by next owner if land sold. Bought late 1800's to keep open aspect for owner & for long row of terraced houses adjacent, owner grassed high slag heap on it about 1910 so his & street's kids play on & not get black feet, beautified mining area for those affording terrace house (miners too eventually) so Churchill definitely wrong re no contributions. Churchill infamous for never having much money despite monied background, various reasons as per excellent book 'Clementine Churchill' by their daughter Mary Soames, all in there. How he acquired Chartwell, almost losing it at one stage re money, think more luck than judgement, finance not his forte, spent years living grace & favour flats like at Admiralty, or from friends or at No.10. So don't take any notice of statement if he said it. Think he bit like artists (as he was), worth more when dead, plus royalties. As for Govt monies & debts of 2 wars, read his famous volumes for eye- watering debt, first 2 volumes I think, he never paid heed to money, what he wanted he got, found by hook or crook, a strategist & none could defy/deny him. Always forgiven by that nation for what he prevented and why treasured, which of course is worth more than money could buy so perhaps he is cleverer than rest as don't think ever a landlord and only barely owner at times but 'got by'. Try Clementine, book fascinating re that view of him.

Rick Del Fante
June 03, 2024

There was a suggestion that houses double in value every 10 years. The real estate industry pedal this by saying the median price in suburb was A and on average 10 years later it’s Ax2. What’s not discussed is the amount of capital poured into the properties over that period including extensions. If you are an investor it’s nearly all supported by all tax payers.
Reforms to the tax system are badly need.

George B
June 03, 2024

On the other hand any investment that returns 7.12% per year (not uncommon with many superfunds) will also double every 10 years so its not a spectacular return by any means. You also need to take into account that inflation erodes real returns meaning that if inflation is around 7% in any year the real (inflation adjusted) return during that year is precisely zero.

David Wilson
June 03, 2024

Australia has a taxation system that is unique in the world in that it that favours investors over those wishing to buy a house to live in. Taxation reform must be PART of the solution to improve housing affordability in Australia by reducing investor demand. Restricting negative gearing; halving the CGT discount and removing the ability for SMSFs to borrow to invest in residential housing are obvious measures to implement. However, there is little chance of this occurring as the Coalition and the right wing media have succeeded in demonising taxation reform and our younger generations will continue to pay a heavy price for this for years to come.

June 03, 2024

"reducing investor demand":

With fewer homes to rent, the poor will be forced to camp or buy. If they use the Bunk of Dad&Mum to save to buy, house prices will decrease. If they opt to mortgage their income, home prices will not decrease.

David Wilson
June 03, 2024

Not exactly sure how you get to the conclusion that "using the Bank of Mum and Dad to save to buy, house prices will decrease". Evidence to date is that this has been yet another factor causing house prices to increase! And btw, the vast majority of investors taking advantage of the existing tax breaks do not build new homes and add to the stock of housing. Instead they simply take the easy road and buy existing houses. [Note: As a way of dealing with this Labor went to the 2019 Federal election with a policy of scaling back negative gearing back so that it only applied to new houses. At the time this was effectively yet again shut down by the Coalition and right wing media via a deceitful scare campaign].

June 03, 2024

"how you get to the conclusion that "using the Bank of Mum and Dad":

Different bank - 'Bunk of Dad&Mum' - no capital withdrawals.

George B
June 03, 2024

David, you almost seem to be saying we have too many rental properties to choose from which flies in the face of reality since vacancy rates are below 1% in some states and rentals are going through the roof.

David Wilson
June 03, 2024

Not at all George. My point is that having generous tax breaks for investors does not guarantee they will build new investment properties. They simply compete with people who want to buy existing homes to live in and drive up prices.
We certainly have a crisis of a lack of rental properties at present and the lack of availablity of long term leases exacerbates this further. Basically, the game is stacked in favour of investors who can jack up rents each year turf out tenants when they feel like flipping a property and realising profit.

June 03, 2024

"generous tax breaks for investors":

Not generous; same as for any investment.

What has been 'generous' to investors is small interest rates; which are ungenerous for prospective home buyer savers.

Peter Davies
June 03, 2024

A first step would be to increase housing supply by severely restricting residential investment by overseas entities through higher taxation etc.Or banning it completely! Apparently there are about 1Million vacant properties in Australia.

June 03, 2024

David, if take term 'housing' to incl. units more readily affordable, it would be hard to believe driving around outer Sydney suburbs with many large complexes of high blocks of units that they are solely being sold to investors and not to some starting their housing journey. For nub of comment re tax system and investors who provide rentals for those saving for deposit or choose to rent as they can't be arsed with ongoing responsibility of ownership & there are some, see Steve's comment 30/5 at bottom of page, hard to disagree with principle he succintly put of investors 'subsiding' a renter despite negative gearing and my comment under re contributions to Govt general coffers when negative gear becomes positive and Inc tax due, plus CGT when sold. All goes to general pot & helps renters who need help via Rental Allowance scheme from that pot. Naysayers forget if investor on 32.5% tax/$ per Steve's eg, cost to investor re letting exp is 0 . 675c/$ exp, add 2% medicare 0.02c/$=0.695/$ expense which as Steve says is a 'subsidy" to a renter & in 2025, 0.72c/$ when rate drops to 30% that band. No vested interest as no n/gearing, it's the maths re tax. Have renter in granny flat,likely leave in wooden box as knows good wicket, couldn't live for less if bought something so can attest some can't be arsed re big responsibilities for owners as in 20yrs not one wanted to save to buy and said so. Another commenter said if investors out of market re Neg Gear there'd be worse crisis as less stock to let, even if homeprice drop not a quick fix to crisis. If CGT removed from homeowners letting room (as in UK to fix crisis), more would let a spare room at reasonable rent for pin money, pay Inc.Tax on it which is a silent tax takeup Govts never think of for Budget forecasts, eases housing crisis instantly with existing stock & infrastructure, not years for new-builds. It's an opaque glass bubble in Canberra for advisers to Govt who live there and prepare the figures, it's they who don't think outside the box, we're just a set of figures to them. MP's at least have to go to their electorate seeing what's going on with ordinary people, well, one hopes.

June 02, 2024

Houses double in value roughly every 10 years. So when median house price was $75000 (1970s) that is an approximate increase of $75000, so $7500/annum. $312000 median house price in Sydney in 2000. Now median house price in Sydney is $1630000, so in 10 years (2034) increase to $3260000, so $163000/year. Average annual wage in Sydney $48000 in 2000, $80000 in 2023. The power of compounding. Who will be able to afford $3260000 for a house in Sydney in 10 years? And remember that most pollies (44%) own more than one house. So that is a strong disincentive to change tax rules. and represents a strong conflict of interest IMHO.

June 02, 2024

Another contributor to demand is the changing size of households - used to be 2.9 people per household in the 80s and now down to 2.5 people. This straight away means we need another 120,000 houses/flats before we get to immigration and students.

G Hollands
June 02, 2024

Not a great analysis James with several leaps of both faith and logic. As indicated above negative gearing ( or investment in real estate) does downplay rents - I see it every week in the figures presented to me by clients (ie, taxpayers) . Just because someone can scrape together a deposit from super fund balances - or whatever, does not, of itself, increase prices. Go back to Economics 101 and review the demand and supply curve - that is the crux of the problem. Along with a massive underinvestment by governments at all levels in investment in social housing - means the demand side continues to grow. Then take an extended period of loan approvals based on "old" criteria against low interest rates and what a surprise, prices increase!

June 02, 2024

it's become a national disgrace.
past stories of how you people made ends meet to buy a home are irrelevant.
houses are now much more expensive than they used to be relative to average incomes.
totally absurd and our younger generation are the victims of total failure of government policies.

June 02, 2024

"past stories of how you people made ends meet to buy a home are irrelevant.
houses are now much more expensive than they used to be relative to average incomes.":

The ratio of price to income is not the only relevant number as it takes time to either save or pay off mortgage making interest rate and inflation highly relevant.

More relevant to then and now is time to save to buy home without mortgage.

'Formula for calculating time to save price of home - without mortgage - with growing income.'

June 03, 2024

Dudley, Loving all your word posts instead of equations.

June 03, 2024

"word posts instead of equations":

Numbers 'speak' more concisely.

June 04, 2024

Dudley, couldn't agree more re figures speak volumes but lovely to discover by words the bloke behind the equations. Catch a compliment whilst you can. L

June 01, 2024

An emotive subject - always. I'd like to share my wife & my experiences which I believe adds some real life colour to the thrust & parry. My wife worked as a nurse then academic. Modest income. I was a member of our Navy (sailor). Modest income! Paying off my first property seemed unattainable at the time & for sure, property prices were lower. But I started small, an ex Govie. I did without & paid down debt when I could. Following our marriage we lived frugally, few OS trips & then, only for family reunions, 2nd hand cars, ate at home etc & invested. We bought investment properties, lived modestly, scrimped & saved. We used neg gearing but as mentioned, it has limits which are quickly reached. (Remove neg gearing from investment properties & investors will likely flee the market. No more rentals.) As a result of these & other reasonable & sensible 'choices', we are enjoying quite a comfortable retirement. We will never draw an aged pension. We will likely assist our kids into their first homes but they don't expect it. I believe home ownership, although more difficult, is still achievable. Certainly stating, as some have 'that it is now unattainable' will make it so. If I could save a deposit on my income back then, young people today can. And I can assure you I had a life.
My wife & I have no more smarts than average but we made sensible, aspirational choices. Negative gearing is a function of our tax & encourages individuals to invest for their future so hopefully, they will not end up on the aged pension & be a burden on our tax system.

George B
June 01, 2024

I applaud your sensible and disciplined approach to life-it validates a premise I have always held- namely that it’s not how much you earn but how you manage/spend what you earn that wins the day.

June 03, 2024

To George B, Satisfied and S2H, thank you for giving real examples which are illuminating and helpful for the young to see that most things are possible eventually. Particularly with George's adage above.

June 01, 2024

I think the issue is that prices aren't affordable. In 2017 I bought my home in one of Canberra's cheapest suburbs at $540,000 for an old 3 bedroom house with my partner. For the purpose of showing changes to affordability, if my income was the entire household's income it would have covered that at a multiple of 5 (and a bit) as I'm above the median income. Fast forward to 2024 and our existing property is valued at $900,000 despite us having done very little to improve it. If I take my single income today (which is proportionally greater than in 2017 against the median) and the multiple is now at 7+.

Obviously this has been very beneficial to my family, just like it has for most Australians on the housing ladder, but PLEASE do not say all young people have to do is work hard and make good decisions and they'll be okay. I used my example to show in a decade the task for young people has become considerably more difficult. Many of my friends will never own their homes, or only do so because of the generosity of their families, and most of them made sound financial choices. I don't mean to have a dig, but I just wanted to go in to bat for the many, many young Australians who are on a tough wicket through no fault of their own. I'm sure there are countless other cohorts who have been losers of Australian housing too (single women over 55 come to mind).

George B
June 02, 2024

I cannot speak for all young people and what they have to do to achieve the great Australian dream but I can say that my son and his partner achieved just that at 32 years of age. He purchased his 1st property (a 2 bed unit) in 2017 in Melbourne’s inner east for about $680k and sold it last year for $815k with minimal spend on improvements (carpets, aircond, new kitchen stove and some paint which he did himself). His purchased his second property in 2023 (a fully renovated 3 bed 2 bath 1930s one of pair in the same suburb) for $1.65m which he and his partner financed with minimal assistance from family. I can also add that my son’s income was above the median (although not significantly so) and his partner’s income (as an early education teacher) was below the median. His partner also brought no savings into the relationship due to health issues and a less disciplined approach to spending.

George B
June 02, 2024

Disgruntled, CG on an apartment or unit will never match that of a house because the land value forms a smaller proportion of the investment. However on the other side of the ledger (since the property was a PPR for most of the period of ownership) there were savings on rental costs (approx. $22k per year) plus comparable rental income during COVID lock-down when our son moved back home. He also received a discount on stamp duty as a first home buyer. CG on the second property which he purchased well 14 months ago is likely already similar or more than on the 1st property after 5yrs of ownership (purchased in December 2017 and settled in April 2018).

June 01, 2024

"on the aged pension & be a burden on our tax system":

Due to the Asset Test Taper, the Age Pension is a burden on those who don't qualify, especially those who are narrowly dis-qualified.

June 02, 2024

George, Taking Stamp Duty up front, rates and interest payments over the 6 years + a little for maintenance. CG barely covered the costs I'd say. Depending on mortgage size, maybe not even that.

June 01, 2024

"Should we be looking at alternative ways to get wealthy? ". The only way people get wealthy from The Great Australian Dream is by selling the house & land for substantially more than they paid for it. If this is a continuing trend rather than isolated cases, how does it differ from a Ponzi scheme?

June 01, 2024

It's a government-sponsored Ponzi scheme. If all three levels of government had conspired to completely stuff up housing I don't think it would have been so successful. S&T governments have consistently not built enough social housing, local councils bow to NIMBYism, and the Federal Government makes things worse by throwing demand policy responses at it and not tackling some of the tax concessions that add to demand. Moving from stamp duty to land tax ASAP would help too as that's currently a significant incentive for people to sit on their homes/disincentive for people to buy a home. Add the demographics issue (fewer people per household) into the recipe and it's a disaster.

At some point you'd think that price matters but the ratio of household income to debt keeps climbing and climbing. It's almost self-perpetuating at this point. The thing that really concerns me is how people will respond to it. There's a generation of people about to have access to a huge pool of superannuation and equity in their homes, and they (logically and compassionately) look at this train wreck and want to help their children/grandchildren by passing that inheritance on, where does this end? My guess is the RBA moving up interest rates until something breaks.

George B
June 01, 2024

Hard to fault you well thought out logic of the causes but a way out will be hard without more pain eg. moving from stamp duty to an annual land tax would help some but hurt others including older income poor home owners in high value suburbs and those who are already paying off big stamp duty bills on their mortgages.

June 01, 2024

Land tax is a wealth tax. No thanks.

Andrew Smith
May 31, 2024

Quite simple, the '80s followed the start of the boomer 'bomb' establishing homes and families following the silent generation now oldies, then add from late '90s incentives for property investors and pensioners houses outside of the means and assets test; adds up to house price inflation.

The oldies and and boomers (presently 7+ million) have dominated elections and have been catered to while employee incomes have stagnated, but (undefined) immigrants* have been falsely blamed by FIRE media and commentators; backgrounded by stagnant median house prices for past decade while many complain not enough houses are being built?

*International students are temporary residents who do not buy houses (cannot get loans), but rent yet only 4% total market; permanent migration program is capped at 190K p.a.

It will balance out like our population pyramid will revert to the norm (upside down pyramid now), starting soon with the 'big die off' till mid century.

June 02, 2024

Yes the big “die out “ will undoubtedly affect the supply of housing. At the moment there’s about 10 million dwellings in Australia , of which 3.5 million are owned by OLD codgers that will soon start going toes-up in droves.
When the deceased estates assets come up for grabs for the Will beneficiaries, it will be a fire sale since the wave of deaths will get bigger & prospective sellers will want to grab whatever they can get before the market becomes flooded with stock from the dead.
We’ll likely see a plateau at best in housing prices.

May 31, 2024

Living on the NSW far north coast I continually hear that affordable housing needs to be provided by developers. Developers are rubbing their hands together reducing lot sizes to say 450m2 to provide “affordable lots”yet still price them and sell them at $1.2M plus- double the yield and definitely not affordable for those in need. State and Fed governments need to seriously fund social housing and stop relying on investors to fill the shortfall.

May 31, 2024

There’s a great Instagram post by Monique Ryan which starts with Peter Dutton saying “ “But I will never accept a situation where the only people who can afford to buy a home are people with rich parents.”
Cut to Monique Ryan :”You did this. Your party did this.” She then goes on to lay the blame at the feet of the major parties. Worth a watch.

May 31, 2024

Nice article James about acknowledging the current 'housing omelet' that needs unscrambling. To do this I hope that as a society we come up with an attitude better than the example set by Darryl Kerrigan.
Remember, the movie's a commentary that says it's OK for Darryl to be selfish and not bother about the greater good he can do for his society (the Airport is in crisis, but he doesn't care about letting it progress to where it needs to go).
Of course, we all want the permanency of somewhere to lay our head, but Darryl's narrative is that it's OK for an entire airport (i.e. the community) be disadvantaged and unable to progress because he's too selfish to shift. How the heck would Sydney Harbour Bridge have been built if people like him had been allowed to prevail?
We need creative solutions and if we think we'll get them by carrying on like a Darryl - we'd have to be dreaming. :-)

May 31, 2024

Your comment reminds me of several families in Qld who are now confronted with resumption of their homes and houses to make room for a section of the main highway to the North of the state. They are understandably outraged that having built the or lives at their homes they have to leave and most very likely at payouts far less than will afford them to relocate to a similar lifestyle. If the majority must be satisfied, I understand the argument, then said majority should also stump up with the funds to relocate these people to a similar lifestyle.

May 31, 2024

Brian, similar case locally for about 10 homes resumption, not for road but a commuter carpark. How does that help housing crisis? Left hand not know what right hand is doing!

Mark L
May 31, 2024

Not just Aust. NZ, UK, Canada, even US to some extent. I wonder what these countries (more so than most other parts of the world) have in common? Maybe it's something to do with their desirability for people from less desirable locations to come to? So maybe immigration has some bearing on housing demand after all?

I recall there have been several relatively recent (last 30 odd years) polls of the broader populace's attitude to levels of immigration. In each one, something like high 60s to low 70s percent of respondents thought they were too high. People were fed-up with clearly deteriorating quality of their lives. Each time, politicians from both sides ignored the polls or argued they were simply wrong - largely on GDP grounds. Remember, the large increases in recent immigration rates began under John Howard. So maybe Peter Dutton is reading the tea-leaves correctly?

Arguments against some limited access to super for home deposits smells like like a case of vested interest to me Home ownership is a very important factor in well-being in retirement. It would be very interesting to see some modelling comparing the outcome of someone at (say 70) who, at the age of 30 could access an amount of super for home purchase deposit vs the same person who could not.

May 31, 2024

Sorry Mark but access to Super for home deposits is plain silly. Why? Because every time governments or the market throw money at the problem it just pushes up prices. Established home owners may benefit but its certainly not their fault someone else is throwing fuel on the fire. What's the point of having another $50k to bid if all those around you have the same - they just start $50k higher and carry on bidding from there. It resolves absolutely nothing and in fact exacerbates the problem. All of this issue comes down to the basic economic law of supply and demand. Price is what is used to (try to) balance supply with demand. Continually rising prices simply means demand continually exceeds supply. If you want to stop prices rising you need to (a) increase supply and/or (b) reduce demand. That's it. Build more homes or lower immigration to take some steam out of demand. Anything that does not address this basic law is just BS and you should treat anyone offering magic solutions like access to more funds with a healthy dose of suspicion. Also note reducing migration is NOT a racist ploy - if you can point out another optional/controllable way to influence demand for housing, we're all ears.

Petet Taylor
May 31, 2024

Why not give buyers the choice of a tax deductible home loan subject to capital gains tax so they are on the same footing as a investor

George B
June 01, 2024

Because it would likely leave a gaping hole in the budget that would have to be filled with higher taxes thus defeating the purpose of the relief.

Peter Taylor
May 31, 2024

It's to be expected in the big australia vision. Smaller block sizes then unaffordable rental housing then progress to rental high rise apartments as in common in heavily populated countries. Water restrictions competition camping expensive fish.
We are sharing. It's expected less people will be winners but the winners will be big winners

May 30, 2024

Chris you mention:

"You say "significant effect" but there's nothing to back it up in terms of numbers or sources. Negative gearing exists in the sharemarket but seems to have NO effect on IPOs, costs, individual stock prices, the market performance or companies."
Gearing certainly does apply when investors borrow to purchase other assets including shares...but do you have the figures RE: negative gearing ie when the investment generates less income than the interest and other costs of the investment resulting in an income loss - which currently can be used to reduce level of other taxable income such as salary.
Typically when gearing into equities etc the loan sizes are much smaller (lower LVR) and the costs of ownership much lower (ie no insurance / maintenance / rates / strata etc plus interest costs) , hence it is reasonable to assume that the negative side of negative gearing (IE the income loss) is much lower compared to the more highly geared real estate investments with much higher other costs of ownership.
Personally I think all negative gearing (off-setting the loss against other income such as salary) should be banned...claim your costs (interest etc) against investment income...and if you have an income loss - that is your issue to fund - not the tax -payers obligation to help you fund. I would prefer to see improvements in health care / education etc than the lost revenue due to negative gearing tax deductions.

Philip Crichton
May 30, 2024

Affordability to own a house is still a powerful political issue, and with the Albanese Govt in free-fall in the polls, it will play a big part in the downfall of this one term Govt. Really, housing affordability it is a national disgrace, and the Albanese Govt made no mention about increasing migration 400% in the last Election. To top it off, huge rental rates are preventing young people from saving to buy a house.

Geoff D
May 30, 2024

I have been saying for many years that there should be a tax payable by the vendor upon the sale of that person's principal place of residence. Of course holiday homes and investment properties are already subject to CGT so it wouldn't apply to them. This would remove heaps of money from the housing market which could be utilised in providing housing for those who need it. One of the reasons for the upward surge in prices more recently is that vendors are achieving ridiculous sale prices enabling them to upscale homes to an equally ridiculous extent. Two problems though: which government would have the political guts to do it (probably none of them!) and can the bureaucrats be trusted to utilise the funds quickly and in a sensible manner (probably not!)

May 31, 2024

I recollect that there was a NSW vendor tax on property about 20 years ago but it only lasted 6 months or so. Anyone remember details

May 30, 2024

Capital is too cheap.

Saving to accumulate capital is insufficiently rewarding:
= (1 + 5% * (1 - 31.5%)) / (1 + 3.6%) - 1
= -0.17%

Consequence is increased home prices cause by competing to buy homes with whatever size mortgage can be had rather than whatever capital can be accumulated through saving.

Real saving rate of +2% would result in competition between savings and home prices.

May 30, 2024

This is for a good reason. I did question at the start about why everybody should be at Hems but having rented for a long time I can see the value of owning your own house. We own our own house. Life has become much better. It’s secure. It’s ours and it’s it’s a way to be comfortable in what we are doing and living.

May 30, 2024

The reason we have a housing crisis is not a lack of homes but a tax system skewed towards subsidising housing investment. At the last census there were a million empty homes in Australia. Government needs to take away the capital gains tax concessions and negative gearing benefits for all residential property investments except when rented out on a long term lease. Unfortunately they don't have the guts.

May 30, 2024

But CGT concessions and negative gearing are also applicable to other types of investments too, though. So I don't think they are the reason behind the housing affordability issues. Most people just fail to realise that the increase in house 'price' is more of a reflection of the devaluation of our money than an appreciation in the property 'value'.

Brian Richards
May 30, 2024

Negative gearing on housing has a significant effect on housing costs in Australia and should be either abolished or restricted to new homes only.

May 30, 2024

You say "significant effect" but there's nothing to back it up in terms of numbers or sources. Negative gearing exists in the sharemarket but seems to have NO effect on IPOs, costs, individual stock prices, the market performance or companies.

No different, really, as it is a function of the current tax system. Plus, it's completely unemotive; no one complains that as a 'first time shareowner', "I'm priced out of the sharemarket".

Taking the same logic, abolishing it or restricting it to new companies only would be completely asinine. Besides, people conveniently forget that negative gearing is only good up to a certain point and only when assets are going up in value; you are STILL having to put your hand in your pocket to cover the costs that are not met by the dividends / rent and eventually, you WILL hit a wall when the lender can't /won't lend you anymore because you still need to be able to service the loan.

In short, it's not a licence to print money; it's a two edged sword. Go and ask apartment holders on the Gold Coast how they fared with negative gearing and if they honestly made any money. Some broke even at best, more lost more money than they made.

May 31, 2024

I agree Chris.Short term thinking seems to rule in everything.In the long term and very rough figures my investment property cost 4 X average annual income in 1989,at high interest rates. I expected it would be better than super,it was. A larger number compounding from day one.

35 years later the house is worth 6 to 6.5 X average annual income No great growth there.

10 years approx of negative gearing,25 years of positive gearing ( much better ) and paying tax on the income.The income rises of course as the mortgage is paid off

We get no pension or cards so there is no point in me wasting time working out how that would reduce a pension under the assets test.

The govt helps me for ~ 10 years,then sits back for the rest of my life and collects.I don't mind that,I hadn't worked that out at the start.Keeping up with changes I slowly realised the chance of any funding from the govt in retirement was zero.I don't mind that.The return from the capital tied up in that house would be 1 to 1.5% after all outgoings and tax.I can think of far better places to put that capital after paying CGT .

Then because I bought that house,the short term thinking is I am to blame.The usual,ripped off the system,doesn't pay tax,full refund of franking credits etc,it is laughable.

One year of the govt saving that pension is probably more than the rebates I got.Two years,they are easily into profit.No point in wasting time on nominal /real calculations.Should I sell that house then the final pay day for the govt.Who knows how much CGT. $150K?.More?.

I can't even think that short term thinking rules.Perhaps a complete lack of thinking.Starting today trying to work out what the world will look like in 35 to forty years time.If it is anywhere near what I think it will look like then it will still be the same ,rorted the system,etc My fault because I plan ahead for decades.Laughable.

May 31, 2024

Brian "Negative gearing on housing has a significant effect on housing costs "
Yes it helps subsidise rents

George B
June 01, 2024

The interest earned on bank deposits is also mostly a reflection of the devaluation of money (interest rates are higher when inflation is higher) but that does not stop the government from taxing it.

May 30, 2024

Yep 1 million homes empty THAT NIGHT. We haven't been home for the last 2 censuses as we were up north getting away from winter, which is when the census is held. Don't extrapolate that number as meaning 1 million homes actually empty in an ongoing basis.
Plus, the "skew" as you call it is also called an incentive. The kind of thing that motivates people to put THEIR capital at risk, housing complete strangers, who may or may not care for the property as you might expect. And if you think of negative gearing as an actual subsidy TO THE RENTER, you might rethink. Why a subsidy to the renter? Because negative gearing means the costs of owning a house (interest, rates, maintenance, insurance etc) are MORE than the income (rent) provided. Yes, the owner spends more to own and maintain the property than the tenant pays in rent. Sounds very much like a subsidy to me. And to motivate the owner to put his/her capital at risk, they get to save about 38% of this on tax (still out of pocket for the remaining 62%). You may like to think that if all landlords sold up shop that all renters would be able to step in. Life's not so simple, many, many renters are simply not in a position to buy a house. If you look at the ABS website you'll see the proportion of renters has been very static at around 30% over the last 50 years, seems a pretty consistent number given how much easier it was to buy a house 50 years ago!

May 31, 2024

You forgot the bit about if you spend money ( put it at risk) you are greedy.

One amazing thing,people I have worked with around the world.Somebody got in touch from years ago.They live in the UK.

Meet up in S E Asia for a beer? No problem,how about Hua Hin I said,,a walk along the beach to recover in the morning is great.Great live music scene at night,nice place.

Somebody said you ( me) own two houses,is that right? Yes,it didn't really pan out as I thought it would. Well nobody needs two houses,sell one of them and when you get the money you can pay for us ( 6 people ) to have a holiday in Australia.I've always wanted to see Australia.Right out of left field that one. One to add to the tenant that thinks I've paid the rent for 6 months,that must've paid for the house,why should I continue to pay rent.They say money makes fools of people,how did they arrive at that conclusion.

Needles to say ( and sadly) no more meet ups in wonderful Hua Hin for laughs and great music.

May 31, 2024

Steve, like how you explained as you are right, don't forget to add in the 'subsidy' to govt general coffers when it becomes ungeared & income tax then payable, then when sold another 'subsidy' from CGT due, all of which helps to pay rental assistance from general coffers for those who need help and are helped. Your post very pertinent.

May 30, 2024

It's become a national disgrace.


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