Buying a house to live in and making lifelong friends with neighbors has long been considered a rite of passage in Australia.
Owning a home with a backyard has, for generations, provided stability for families, helped foster close community ties, and given young couples something to work toward.
There is also space to grow vegetables, play sports in the garden or read a book under a tree.
Not to mention the financial freedom of a homeowner and the feeling of having a stake in their suburb – feeling like a valued member of society who is rewarded for their hard work.
But what was long considered the great Australian dream is increasingly becoming just that: a pipe dream.
This will surely cause more social problems, exacerbate social tensions, leave millions of people in debt and elderly people struggling to survive, and even lead to riots in the streets.
Younger Australians In fact The situation is worse now than during the Great Depression – at least when it comes to housing affordability – with increasing levels of immigration robbing younger generations of an economic future.
And it means that many of you reading this will never own a home and will face the prospect of lifelong financial insecurity, through no fault of your own.
Owning a home with a backyard has, for generations, provided stability for families and close community ties (pictured is an archive image of an Australian backyard)
AMP chief economist Shane Oliver, who compared house prices in the capital with wages dating back to the 1920s, tells me that many young people are likely to end up as lifelong renters, and that affordability of housing is the worst it has ever existed.
“That’s the risk that we end up with a generation or a large portion of Generation Z confined to the rental market, which obviously has long-term consequences because the key way to increase wealth in Australia is through property ownership.” ‘, says.
“That is denied to many Australians and will leave them in a difficult financial situation for much of their lives.
“It’s not a great situation; it is creating social tension and that could become more serious; it is essential that we solve this affordability problem.”
The lucky ones may inherit a house from their parents, but at a later stage in their life.
‘By the time that happens, you’re 55 or 60 or something; That may allow you to pay your mortgage when you reach that age, but it is not an ideal situation,” he says.
Those who do not come from a wealthy family are increasingly at risk of becoming destitute in old age or of overwhelming debt if they manage to enter the housing market.
“It’s not a fair situation because your parents weren’t rich, you don’t get anything when they pass away,” Dr. Oliver says.
In the early 1930s, at the start of the Great Depression, a typical house cost only six times the average wage, but now it costs 13 times.
“We are now seeing many more people retire with higher levels of debt, which will become a bigger problem.”
While the 3.9 percent unemployment rate is nowhere near the 32 percent level of 1932, it is much more difficult for a worker to buy a home compared to the prewar decade.
In the early 1930s, at the start of the Great Depression, a typical house cost only six times the average wage, but now it costs 13 times.
To put this into perspective, houses in Australia’s capital now have a median price of $1.009 million, which is unattainable for someone earning an average salary of $77,000.
That excludes the typical worker buying a home in a mid-distance suburb of Melbourne or Brisbane, where prices have risen by double digits over the past year.
Sydney’s median house price of $1.471 million is 14.7 times Australia’s median full-time salary of $100,000 and 19 times the median salary of $77,000.
An AMP chart from the Australian Bureau of Statistics and data from CoreLogic showed that a typical house cost just twice the average wage during the war years.
During the 1950s, when Australia had migration and a baby boom, the ratio rose to level four, stabilizing around the six mark until the late 1990s.
Younger Australians actually have it worse now than during the Great Depression, at least when it comes to housing affordability, with increasing levels of immigration depriving future generations of an economic future (pictured, La Perouse in south-east Sydney during the Great Depression).
But over the past 25 years, housing affordability has deteriorated radically as levels of overseas migration have increased, tripling during the 2000s.
Net levels of overseas migration soared from 111,441 in 2000 to 315,700 in 2008, as the China-led resources boom prompted governments on both sides of the aisle to import more skilled workers.
“Basically what happened around the 2000s was we had a huge increase in immigration starting in 2006,” says Dr. Oliver.
“We had an increase in immigration without a proportional increase in supply.”
This housing shortage of the 2000s has continued to worsen, with net overseas migration in 2023 reaching a record 548,800.
In 1931, Australia had a net overseas migration rate of -12,117, as more people left the country than entered permanently.
Australia’s net overseas migration rate did not reach six figures until the early 1950s, before declining again.
Although the level of 100,000 was again reached, for several years in the late 20th century, the increases were only temporary.
AMP chief economist Shane Oliver, who compared house prices in the capital with wages going back to the 1920s, tells me that many younger people are likely to end up being lifelong renters, and that housing affordability is the worst it has ever been (pictured, a Bondi rental queue). in Sydney)
But in the 2000s, immigration levels remained consistently in the six figures until the 2020 pandemic.
Dr Oliver says younger people will only be able to own a home if governments on both sides of politics control immigration to ease the housing shortage.
‘Part of this involves keeping immigration levels in check or limiting population growth so that it is consistent with the ability to provide new housing.
More bosses could also employ staff outside major capitals or allow working from home.
“The problem with capital cities is that they are already very expensive and very congested,” says Dr Oliver.
“We should look at ways to better decentralize and distribute our population across the country, which would also contribute to more affordable housing.”
This could involve allowing more working from home, so that more young people with bosses in cities could move to regional areas, building on a good idea that emerged during the pandemic before staff were called into the office.
“I don’t think we’ve made the most of it, but one way to encourage decentralization is to encourage more people to work from home, wherever they can,” he says.
Our way of life is clearly under threat, and repeating the bad government policies of the last two decades will only end the great Australian dream forever.