Is it a House or a Home?
Australia has spent years talking about a housing affordability crisis. Houses are too expensive, young people are being locked out, deposits take too long to save and home ownership is starting to be dependent on whether your parents happened to buy property at the right time. Then house prices fall and suddenly that is bad news too. So, respectfully, what exactly do we want?
*cracking my knuckles before I begin*
The political reality is that governments are trying to improve affordability without materially reducing the value of the largest asset millions of voters already own. We say we want affordable housing, but we also want existing homeowners to keep getting richer. Those two things cannot rise together forever. Maybe housing remains unaffordable partly because every genuine solution creates a visible loser, and the current system creates its losers slowly and mostly among people who don't own yet.
Warning: Oh so many numbers ahead, they are very important. But, if you loathe statistics that much, you can skip to the pretty love heart I put after them.
Australian housing prices have recently started going backwards. By August, the RBA estimated that national housing prices had fallen 1.6 per cent from their peak in March 2026, Sydney and Melbourne have recorded some of the largest declines. The ABS has since reported that the mean Australian dwelling price fell 0.7 per cent in the June quarter to about $1.1 million, including a 2.4 per cent fall in NSW to an average of roughly $1.305 million. Before anybody celebrates the arrival of affordable housing, the same ABS series has the mean price 8 per cent higher than a year ago and roughly 50 per cent higher than at the beginning of the pandemic. The longer-term comparison is considerably worse. According to the 2026–27 Federal Budget, median housing prices increased from around four times average full-time earnings in 1999 to around eight times by 2026. Among Australians aged 25 to 39, 54.6 per cent of Millennials owned a home in 2021, compared with 62.1 per cent of Gen X and 65.8 per cent of Baby Boomers when those generations were the same age.
On those numbers, cheaper houses sound like exactly what we have spent years asking for. Obviously, it is not that simple. A house falling from $1 million to $950,000 does not necessarily become more affordable if the reason it fell was that interest rates increased and the mortgage became harder to service. Scheduled mortgage and consumer-credit repayments were sitting at just under 12 per cent of household disposable income in the June quarter, close to their 2024 peak, after the RBA raised rates three times earlier this year. A cheaper purchase price accompanied by substantially more expensive credit can leave a first-home buyer no better off, or even worse off.
I'm also not suggesting Australia should collectively pray for a housing crash. A young couple who bought six months ago with a small deposit has a very different relationship to falling property prices than someone trying to enter the market. Sharp falls can push recent buyers into negative equity, weaken household spending and create broader economic problems. At the moment that particular risk remains contained, with the RBA estimating in July that fewer than 1 per cent of borrowers were in negative equity, but the principle still matters. The RBA has previously estimated that a 10 per cent decline in housing prices can reduce household consumption by around 1.5 per cent over time through wealth and related effects.
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What's your problem Tahlia?!
The problem is that in Australia, a house is expected to be both a home and an asset, and those two functions do not always want the same thing from prices. It is also the largest financial asset many Australians will ever own, which means once someone has bought one, they understandably want its value to rise. Those two desires coexist quite happily while you are speaking about them in vague political language. "Housing affordability" sounds good. "Building household wealth" also sounds good. Economically, they eventually start arguing with each other. At the 2021 Census, around two thirds of Australian households owned their home either outright or with a mortgage. Housing is therefore not some niche investment market governments can restructure without most people noticing; an extraordinary amount of household wealth is sitting inside it. For someone who already owns a house, rising prices can feel like financial progress. Their equity increases, the value of their collateral rises and they feel wealthier. For someone who does not own one, the exact same price movement means the deposit moves further away. So nothing immoral has happened on either side, both people are responding rationally to where they sit.
Imagine two women who are both 28. One scraped together a deposit, borrowed heavily and bought an $800,000 apartment last year. The other has $80,000 saved and is desperately hoping to buy her first place. A 15 per cent fall in property values would be horrifying to the first woman and potentially life-changing for the second. One person's affordability improvement is sitting directly on another person's balance sheet. That is the political economy of housing in miniature.
There are ways affordability can improve without a dramatic nominal fall in prices. Housing prices could remain relatively flat while incomes rise, bringing the price-to-income ratio down gradually. Australia could also build enough additional housing, particularly in high-demand areas, that supply begins to relieve pressure on prices and rents. The Productivity Commission's current housing inquiry says that Australia does not build enough housing in the places people want to live, and identifies land-use restrictions and insufficient enabling infrastructure as major constraints. Supply is increasing. By August, around 308,000 homes had been completed since the National Housing Accord period began, approximately one quarter of the five-year target of 1.2 million, while approvals and commencements had also improved. Good progress I guess, although it demonstrates the scale of the job: housing supply moves slowly, whereas demand, credit conditions and prices can move considerably faster. Take the current tax policy, the government announced in the 2026–27 Budget that from July 2027 negative gearing will generally be limited to new residential builds, alongside changes to the capital-gains-tax treatment of investment property. Importantly, existing properties held before Budget night are grandfathered. The government's own Budget material notes that 83 per cent of new investor loans in 2025 went towards existing property rather than new housing. Whatever you think of those reforms, the design itself tells you something. Government wants to change incentives at the margin and suddenly destroy the assumptions under which millions of people previously invested.
There is a fundamental difference between a policy problem where everyone can become better off and one where changing the status quo redistributes advantages that people have already built their lives around. At the same time, people who arrived later are being asked to buy into that system at historically elevated prices relative to their incomes, and they are starting from behind.
When house prices rise faster than wages for long enough, wealth starts mattering more in determining who can buy. Saving harder can only do so much when the asset you are saving for is appreciating faster than your capacity to accumulate the deposit. Family wealth then begins filling the difference, which is how a housing affordability problem gradually becomes an intergenerational wealth problem as well. I think this is why I find the politics of housing much more interesting than the usual argument over whether house prices are "good" or "bad". Governments are effectively being asked to make housing more affordable for people who do not own it without making the people who already own it feel materially poorer. How do you even do that?
If prices rise strongly, homeowners accumulate wealth while aspiring buyers fall further behind. If prices fall sharply, recent purchasers lose equity, household consumption can weaken and financial risks increase. If prices simply stagnate while wages catch up, affordability can improve much more cleanly, but that adjustment could take years. Building significantly more supply is probably the least destructive long-run route, although even that runs into planning restrictions, infrastructure requirements, construction capacity, local opposition and the unavoidable fact that homes take time to build. I don't really have an interest in pretending I can solve Australian housing policy in 1,500 words. People more qualified than me have been arguing about that for decades.
I just wanted to highlight my observation.
We talk about housing as though we want it to behave simultaneously like an affordable essential good and an appreciating investment asset. For an individual homeowner, wanting your property to increase in value is completely rational. For a country trying to make home ownership accessible to the next generation, endlessly increasing the price of entry clearly is not. At some point, something has to grow more slowly. Maybe that means prices falling in real terms. Maybe nominal prices spend years doing very little while wages catch up. Maybe substantially greater supply changes the equation. Most likely it is some combination of factors far less satisfying than the dramatic solutions people like arguing about.
If every rise in house prices is celebrated as wealth creation and every meaningful fall is treated as an economic problem, eventually we have to decide what we are asking housing to be. A home should become easier to access. An asset should become more valuable. The crisis we are in now is partly because Australia has spent decades trying to make the same thing both. Maybe part of the contradiction exists culturally too. We have become completely accustomed to the idea that accumulating multiple properties is simply good financial sense, and individually, under the system we have created, it often is. But I do wonder whether something changes ethically when an essential good becomes an asset we are encouraged to accumulate without limit, particularly while other people are struggling to access even one.
Anyway.
LOVE U BYE XX