By Michael Yardney September 6, 2026

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Housing Affordability in Australia: Do We Actually Want It?

Property Investment
Housing Affordability in Australia: Do We Actually Want It?

Key takeaways

"Housing affordability" is not one problem but three - saving the deposit, qualifying for a loan, and servicing the mortgage

Most Australians, including homeowners, landlords, banks, and state governments, benefit financially from rising property prices

First-home buyer grants typically push prices higher without adding supply, making the overall situation worse

The most realistic path to affordability is a slow, multi-decade process where income growth persistently outpaces price growth

A sudden property price crash would damage banking stability, consumer spending, superannuation, employment, and the broader economy

Policy shifts like the budget's negative gearing changes flow directly from this tension between existing owners and aspiring buyers

Quality properties in strong locations hold value across policy cycles because underlying demand is structural, not sentiment-driven

Long-term investors who focus on fundamentals rather than tax incentives are best placed to navigate whatever policy environment comes next

Everyone says they want housing to be more affordable.

Politicians campaign on it, journalists write about it, and young Australians desperately need it.

But after watching our housing markets for over five decades, I've come to believe that most of the people saying it don't actually mean it - at least not when they understand what it would require.

Let me explain what I mean, because this is one of the most misunderstood conversations in Australia right now.

Affordability

"Affordability" means different things to different people

When a politician stands up and promises more affordable housing, what exactly are they promising?

Because affordability is not a single thing - it's at least three separate problems stacked on top of each other.

The most commonly used measure is the price-to-income ratio - the simple comparison between the median house price and the median household income.

If a home costs three times the typical annual income, housing is considered affordable. If it costs more than eight times, the market is considered severely unaffordable.

By that measure, most of Australia is now in the severely unaffordable category.

But that measure alone doesn't tell the whole story, because it ignores deposits and interest rates - which are the real obstacles for most buyers.

The second hurdle is saving a deposit.

Organisations like the Grattan Institute measure how long buyers must save to secure a 20 per cent deposit, and an Australian median household now needs to save for well over a decade for a median house.

Then there's the mortgage repayments question.

A common benchmark in Australia is that housing becomes financially stressful when repayments exceed 30 per cent of household income. For many buyers today, they clear the deposit hurdle only to find the repayments still stretch them to the limit.

So when we talk about "affordability," we're really talking about three separate challenges - saving the deposit, qualifying for the loan, and then actually servicing the mortgage over time.

Solving one of them without addressing the others doesn't fix the problem.

What would actually make housing more affordable?

Governments have three main levers they can pull.

The first is income growth - a richer population with higher wages finds housing easier to afford, even if prices remain high in dollar terms.

The second is house prices, where the goal is not necessarily for prices to fall but for them to grow more slowly than incomes over time.

The third is interest rates, where lower rates increase borrowing capacity and reduce monthly repayment stress.

Here's where it gets politically uncomfortable, and this is what most commentators don't say plainly: improving housing affordability means house prices being lower than they otherwise would be.

For the 30-year-old still renting, that sounds like exactly what they need.

Yet for the 60-year-old who has spent decades building equity in their family home, that same outcome feels like a threat to their retirement security.

Most of the country benefits from rising prices

Fact is in Australia, three-quarters of voters own the home they live in.

The rental stock is supplied largely by around 2.5 million small "mum and dad" landlords who want their investments to rise in value.

State governments benefit from higher prices because property-related taxes make up a large share of their revenue.

Australian banks profit from bigger and longer mortgages. Property developers, mortgage brokers, tradespeople and related industries also do better when prices are rising.

When you add all of that up, the uncomfortable reality is that the majority of Australians - and most of the stakeholders in the system - benefit financially from rising property prices.

That makes genuine housing affordability reform extremely difficult to deliver, regardless of which party is in power.

Paying lip service to affordability is easy…

You can promise an ambitious housing target. You can promise to cut migration in the name of affordable housing, without explaining how you plan to fill the workforce gaps or rebalance a federal budget that relies heavily on income tax.

You can introduce more first-home buyer schemes and hope nobody notices that they make housing more expensive while also being inflationary.

I've watched these policy cycles repeat for decades. First-home buyer grants are the classic example - they give buyers more purchasing power without adding a single extra house to the market, which simply pushes prices higher.

Sure, they help the individual buyer who receives them, while at the same time, they make things worse for every potential buyer who doesn't.

What a genuine long-term solution looks like

Economists sometimes call it the "slow repair" strategy - ensuring house prices consistently grow at a lower rate than incomes.

If incomes rise faster than house prices for long enough, housing gradually becomes more affordable without requiring nominal price falls. It is politically safer, but it requires patience.

This is probably the most realistic path forward, and I think it's more or less what the current government is quietly pursuing, whether they say so explicitly or not.

The 2026 federal budget gave some signals in this direction.

Labor's approach appears to be letting incomes gradually catch up with prices rather than trying to force prices down, while directing investment toward new supply through planning reforms and infrastructure spending.

Demographics are shifting the political equation over time too.

With every election cycle, old homeowners leave the electoral roll while pessimistic young people who have been locked out of the market reach voting age. The major parties will need to offer these younger voters genuine optimism about their housing future if they want to remain relevant.

What would actually happen if prices crashed?

There's a growing chorus of voices calling for dramatic price falls of 30 or 40 per cent, and while I understand the frustration behind that view, the economics don't support it.

A sudden collapse in house prices would ripple far beyond the property market.

Millions of recent buyers would fall into negative equity, meaning they owe the bank more than their home is worth, increasing the risk of mortgage defaults.

Since residential mortgages make up the majority of Australian bank lending, a surge in defaults would pressure the banking system and likely require government intervention.

Households would feel dramatically poorer as trillions in housing wealth evaporate, consumer spending would fall, and the broader economy could slide into recession.

Construction activity would stall, unemployment would rise, state governments would lose stamp duty revenue, and the share market - dominated by bank stocks in Australia - would likely fall, dragging down superannuation balances and hurting retirees.

In other words, the cure would be worse than the disease.

A housing price crash doesn't just affect property owners - it affects every Australian through employment, banking stability, superannuation and the broader economy.

What this means for property investors

I've always taken the view that property investors need to understand the environment they're operating in, not just the asset they're buying.

Understanding the affordability debate is part of that.

Policy changes - whether to negative gearing, capital gains tax, stamp duty or first-home buyer incentives - all flow from this underlying tension between the interests of existing owners and the needs of aspiring buyers.

The budget's recent changes to negative gearing for new builds, for example, are a direct consequence of the government trying to thread this needle - keeping existing investors broadly onside while directing new investment toward increasing supply.

My view has always been that the investors who navigate these shifts well are the ones who focus on fundamentals rather than tax structures.

Good properties in strong locations hold their value across policy cycles because the underlying demand never goes away, while outer suburban developments that depend on government incentives to attract buyers are far more exposed to policy risk.

The bottom line

Housing affordability in Australia is a genuine and serious problem, particularly for younger Australians trying to get started. I don't dismiss that for a moment.

But the solution is more complex than any single election cycle can deliver, and most of the voters and institutions that would need to support real reform have a financial interest in the status quo.

The most likely path forward is a long and gradual one - incomes rising faster than property prices over many years, combined with genuine increases in housing supply over time. That's not the dramatic fix many people are hoping for, but it is the realistic one.

For investors who understand this, the message is straightforward.

Australian property remains one of the most resilient long-term assets available, supported by strong demand, constrained supply, and a policy environment that - despite all the noise - has never structurally favoured falling prices.

The investors who do well in this environment are the ones who buy well, hold for the long term, and don't get distracted by the political debate swirling around them.

If you'd like help building a property portfolio that works in any policy environment, the team at Metropole would be glad to help.

Click here now and have a chat with one of our wealth strategists.

When you do, you'll realise we're much more than just another buyer's agent. We help our clients safely grow, protect, and pass on their wealth through strategic advice. Property is the vehicle, but strategy is the driver.

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.