Key takeaways
Australia's housing market reflects deeper societal divides.
While homeowners and investors continue to prosper, renters, younger Australians, and migrants face mounting challenges.
Courageous policymaking and systemic change are essential to addressing these inequities and ensuring economic stability for future generations.
Australia’s housing market has long been a barometer of economic health and societal prosperity.
Yet, its impact is uneven, creating distinct winners and losers in a system that seems designed to favour those already in the game.
As property prices continue to rise around the country, housing affordability can’t stay out of the news, so in this week’s Demographics Decoded Podcast, Simon Kuestenmacher and I discuss who benefits, who loses, and what it means for future generations.
Of course this is more than just a matter of numbers—it’s a reflection of policy decisions, demographic shifts, and societal priorities.
For weekly insights and strategic advice, subscribe to the Demographics Decoded podcast, where we will continue to explore these trends and their implications in greater detail.
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The Winners: who gains when property prices rise?
Homeowners and Property Investors
There are 11.3 million dwellings in Australia, and the total value of all the residential real estate in Australia is $11.1 trillion, according to CoreLogic.
Homeownership remains the cornerstone of wealth creation in Australia with roughly two-thirds of Australians owning the home they live in, and 2.3 million Aussies owning investment properties.
For these groups, rising property values translate into increased equity, wealth, and financial security.
Homeowners see their net worth grow passively while investors enjoy higher rental returns and capital gains.
The benefits extend to the so-called "Bank of Mum and Dad," where parents use the equity in their properties to help their children enter the market, reinforcing a cycle of wealth that stays within families.
However, this perpetuates the widening gap between those who have access to this type of support and those who do not.
State Governments and Local Councils
Few entities benefit more from rising property prices than state governments.
Stamp duty, a tax charged during property transactions, delivers a windfall every time a house changes hands.
While land tax has been proposed as a fairer, more sustainable alternative, it is politically unappealing to introduce it as an alternative to stamp duty due to its gradual revenue flow compared to the immediate sugar hit of stamp duty.
Local councils also profit from fees tied to property values, ensuring they have a vested interest in keeping prices high.
This reliance on property-related revenue creates a system where governments are financially incentivised to maintain high prices, even as affordability becomes a national crisis.
Other winners
Banks can sell bigger and longer mortgages if home prices rise.
At the same time, all those in property-related industries such as real estate agents, buyer’s agents, mortgage brokers, auctioneers, property developers and property spruikers come out on top.
There is a broad ecosystem of property websites, financial advisers, insurance companies, property valuers, property photographers, and lawyers that is in higher demand when property prices rise.
And politicians see that most Australian voters benefit from higher house prices.
It is a great excuse to repeat the famous John Howard quip that he had never met anyone who complained about their house going up in value.
This led to quite a few silly policies that pretend to tackle housing affordability.
The Losers: who pays the price of high housing costs?
Renters
Renters face mounting challenges as rising property prices push rents higher.
With no stake in the property market, they often find themselves trapped, unable to save for a deposit as rental costs consume an increasing portion of their income.
First-Home Buyers
First-home buyers are arguably the most visible casualties of skyrocketing prices.
Policies like first-home buyer grants and superannuation withdrawals for housing are touted as solutions, but they often exacerbate the problem.
By injecting more money into the market without addressing supply issues, these measures inflate prices further, creating a cycle where each new generation finds it harder to enter the market.
Younger Australians
The wealth gap between generations is widening.
Millennials and Gen Z, particularly those without access to the “Bank of Mum and Dad,” feel increasingly shut out of the market.
Despite earning competitive wages and having solid educational backgrounds, they struggle to compete with older generations who have benefited from decades of rising property values.
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This growing sense of disenfranchisement has significant social and political ramifications.
Skilled Migrants
Housing affordability also threatens Australia’s ability to attract and retain skilled migrants.
While high-income professionals like engineers and IT specialists may manage, lower-income migrants in healthcare and aged care face significant hurdles.
For many, the prospect of sending money home as remittances while trying to save for a home in Australia seems untenable, making destinations like New Zealand or Canada more appealing despite their own housing challenges.
Policies at Play: why the problem persists
Short-Term Solutions, Long-Term Problems
Policies like first-home buyer grants and superannuation withdrawals for housing are politically palatable but economically flawed.
They provide a temporary boost to select groups while driving prices higher for everyone else.
Worse, they erode long-term financial security by depleting retirement savings and diverting public funds to ineffective programs.
Zoning Changes and Supply Initiatives
Recent zoning changes in states like New South Wales and Victoria aim to promote medium- and high-density housing near transport hubs.
While this is a step in the right direction from an urban planning perspective, it doesn’t address the underlying cost of construction, which is significantly higher for apartments than for houses on greenfield sites.
Developers naturally gravitate toward high-margin projects catering to wealthier demographics, leaving affordable housing underproduced.
Migration and Affordability
Australia’s ambitious plan to build 1.2 million new homes in five years is a step in the right direction but faces significant obstacles, from labour shortages to high material costs.
Meanwhile, Build-to-Rent schemes offer some hope, but these projects are unlikely to meet the full spectrum of demand, especially for low-income families.
The Path Forward: balancing winners and losers
A Shift in Political Will
A genuine solution requires honest, courageous policymaking.
Policymakers must prioritize long-term strategies over short-term optics.
For instance, tax reforms that favour renters or incentivise the construction of affordable housing could help rebalance the scales.
At the same time, governments must transition away from policies like first-home buyer grants that create more harm than good.
Preserving Political Stability
The dissatisfaction of younger Australians is already reshaping the political landscape.
Millennials and Gen Z voters are abandoning the major parties in favour of smaller, more radical alternatives.
This trend could lead to a fractured political system, complicating the policymaking process.
To avoid this, major parties must address housing inequities head-on, even if it means making tough, unpopular decisions.
What Lies Ahead
Australia’s housing market is a microcosm of broader societal divides.
While homeowners and investors continue to thrive, renters and younger Australians face mounting challenges.
Without significant intervention, these disparities will only deepen, threatening social cohesion and political stability.
For now, the winners in Australia’s property market remain dominant, but the tide could shift.
Whether policymakers can rise to the challenge remains to be seen, especially when there are so many winners when property values rise.
But one thing is clear: the stakes have never been higher.
Understanding these dynamics is not just an academic exercise—it’s essential for navigating Australia’s economic future.
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