If Australian property feels like a game where the rules keep changing, you’re not imagining it. Prices have climbed sharply in many parts of the country, supply has struggled to keep pace with demand and getting into the market can feel increasingly out of reach, especially if you’re a first home buyer.
But according to economist Evan Lucas, it’s not as simple as saying Australian property is too expensive or blaming one generation. In the third episode of the Get Rich Slow Club’s four-part economics series, Evan and Ana examine why there’s no single explanation for Australia’s housing market.
Read our overview of the episode below or scroll to the end to listen.
There isn’t really one Australian property market
Sydney, Melbourne, Brisbane and Perth can all behave differently, while prices and conditions can vary dramatically between suburbs.
One reason is Australia’s concentration of people in urban areas. Evan says around 68% of the population lives in urbanised areas, with many Australians wanting to live close to work, particularly around major CBDs.
In Melbourne and Sydney, some of the highest house price ratios are found within roughly 10km and 15km of the CBD, respectively. Population growth adds to demand in these areas, but Evan points out that it’s not just about migration – people having children and needing family homes matters, too.
The result? Lots of people want to live in the same places, but there isn’t necessarily enough housing to accommodate them.
We haven’t built enough homes
Evan argues that Australian housing supply has been relatively lax over the past 40 years, with planning rules, approval processes, local government decisions and community attitudes towards development all playing a role.
There’s also a cultural factor. Australians have historically preferred standalone houses with backyards – essentially, owning “the dirt” as well as the building.
The problem is that there isn’t enough of this kind of housing in the places people most want to live. That then leaves buyers with a choice: move further out, pay more or accept a townhouse or apartment. Unfortunately, Australia’s transport infrastructure doesn’t always make moving further out appealing.
We have plenty of land geographically, but most people are concentrated in a small number of cities. There isn’t necessarily enough housing where people actually want to live.
The numbers have changed dramatically
One way to see how much the Australian property market has shifted is to compare prices with incomes.
Evan points to Perth, where the house price-to-income ratio has risen from around 4.5 times income to about 8.5 times. Brisbane has also increased, from roughly 5.5 times income to around 9.5 times. Historically, Evan says, the typical house was closer to three or four times the average income.
That makes buying a home very different from what previous generations experienced. It also explains why telling younger Australians to “save harder” can miss the point: if prices rise faster than incomes, the home deposit hurdle keeps moving further away.
Then Covid changed the equation
In 2020 and 2021, interest rates were cut to extremely low levels to support the economy. For borrowers, that meant cheap mortgages and greater borrowing capacity. When you can borrow more for the same monthly repayment, you can also bid more for a house. Evan argues this helped push up demand and prices.
The experience hasn’t been identical across the country. Evan points out that Melbourne’s prices remain around 15% higher than during the Covid period, while Perth has experienced particularly strong growth since then. So while headlines talk about “the property market”, conditions can look very different depending on where you live.
Property is different from shares
Property is also much less liquid than financial assets.
If you own shares and decide they’re no longer worth what you paid, you can sell almost instantly. A homeowner doesn’t have to do the same thing. If buyers don’t meet a seller’s expectations, the seller can simply decide not to sell. That can reduce the amount of property available when prices are falling.
At the time of recording, auction clearance rates were below 50%, with around 47% of properties clearing. Rather than automatically dropping their expectations, some sellers chose to take their properties off the market.
Adding more buyers doesn’t create more houses
Government housing policies can also be complicated.
Evan points to the 5% deposit scheme as an example of a policy that tackles demand by helping more people buy with a smaller deposit. But if more people can buy without more homes being built, demand increases without necessarily increasing supply. Evan argues this can put further pressure on prices.
Supply also takes time to respond. According to Evan, it can now take around 30 to 33 months to build a home, with upwards of 15 months potentially spent on planning, approvals and other processes before construction begins. So, even if governments decide today that Australia needs more housing, it can take years for that decision to produce actual homes.
Why don’t older Australians downsize?
Encouraging older Australians to move out of large family homes could, in theory, free up housing for younger families. But people may not want to leave homes where they’ve lived for decades, built community connections and feel comfortable. Suitable smaller homes may not be available nearby, either.
Then there’s the cost. Stamp duty, agent fees and other upfront property costs can make downsizing expensive, particularly without a strong financial incentive. Evan gives the example of agent fees of around 1.5-2% of the sale price, while stamp duty can also be significant.
So even if a home is technically “too big” for its occupants, there are plenty of reasons they might stay.
It’s not as simple as blaming boomers
It’s tempting to frame the problem as one generation getting rich from property while another struggles to enter the market.
But Evan argues the reality is more complicated. Housing affordability reflects decades of interactions between supply, demand, planning rules, population growth, interest rates, infrastructure, taxes and individual choices. There’s no single villain, and no single policy that will fix everything.
Evan does raise some unconventional ideas, including a HECS-style system that could allow older Australians to borrow against their homes through a government-backed arrangement, with the debt repaid when the property is sold or after death. It’s an idea from recent economic papers, not a ready-made solution. But it shows the kind of thinking that may be needed to unlock some of the housing wealth already sitting in Australian homes.
Melbourne has its own problems
Melbourne faces some additional challenges.
Evan points to changes to Victorian housing and property policies, particularly those affecting investors and the rental market. He also describes Victoria’s economy as relatively weak, while population growth in Melbourne has been slower than before Covid. That matters because population growth is a major source of housing demand.
Despite Melbourne’s recent challenges, Evan sees a bigger long-term story. Demographic data suggests Melbourne could become Australia’s largest city by 2050, with Evan discussing the city’s potential expansion towards areas such as Geelong, Ballarat and Bendigo. The question isn’t whether Melbourne will grow, but how that growth will be accommodated.
So, will you ever be able to buy a house?
Evan keeps coming back to one point: property isn’t just an investment. It’s also where you live.
If your goal is to buy a home where you can raise a family and live the way you want, its value isn’t purely about capital growth – but you may need to rethink what that home looks like. Maybe it’s further from the CBD, a townhouse or apartment rather than a standalone house, smaller than you imagined, or without that idyllically spacious backyard.
That doesn’t mean giving up, but recognising that Australia’s housing market has changed – and that getting what you want may require changing your approach.
If Evan’s explanation makes one thing clear, it’s that Australia’s housing problem isn’t caused by one factor. Unfortunately, that means there probably isn’t one easy fix either.
Keen to learn more? Listen to the episode here.
