Flat White

The big reason you can’t afford a home

2 July 2022

4:00 AM

2 July 2022

4:00 AM

Why are houses so ridiculously expensive in Australia? This, and other expletive-laden questions, I shouted at my screen while scrolling through realestate.com recently.

Is it because of our high wages? Maybe it’s because of Baby Boomers? Or is this just the way the world works, so stop asking questions?

Alan Kohler of the ABC puts it down to interest rates. Writers at The Guardian blame a lack of social housing. And politicians mutter something about supply chain issues, then quickly change the subject. Insightful as always.

As with most things, the simplest answer is often the first one overlooked.

Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist of AMP Capital writes:

‘Starting in the mid-2000’s annual population growth surged by around 150,000 people per annum and this was not matched by a commensurate increase in the supply of dwellings

‘The supply shortfall relative to population-driven underlying demand is likely the major factor in explaining why Australian housing is expensive compared to many other countries that have low or even lower interest rates.’

In non-economist speak, it’s supply and demand, stupid. Thanks largely to net-overseas migration, our population is growing faster than housing supply can ever keep up with.


Leith van Onselen, Chief Economist at Macro Business, echoes a similar sentiment, saying that though interest rates have had a major impact on recent rises, immigration is the longer-term driver of higher house prices in Australia.

‘Overseas migration rose from an average of 90,500 between 1991 and 2004, to 219,000 between 2005 and 2019… that’s 140 per cent annual average increase.’

Using data from the ABS, van Onselen finds a correlation between migrants overwhelmingly choosing to settle in Sydney and Melbourne, with an above-average rise in house prices in those areas.

Essentially, what van Onselen and Oliver have done is confirm a lot of people’s suspicions that growing our population without proper planning is dumb as nails and making people’s lives worse. Even monkeys could make better strategists. 

Some might say that owning a house is a pretty integral part of, oh, let’s say civilisation. We know that upward pressure on housing prices puts downward pressure on wages, living standards, birth rates, and eventually, quality of life.

Why, then, is the topic utterly trivialised with shrugged shoulders and phoney solutions by our experts and leaders?

To paraphrase recent government policies: ‘Ha! Housing? Who cares! That’s the next generation’s problem. Up yours, kids.’

Indeed, the government either completely ignores the effects of migration on house prices, or they mindlessly promote it, citing the benefits of increasing consumer demand in an economy.

Yet presumably this ‘increased demand’ extends also to houses and rentals, not just things like chocolate bars and televisions. Oh, and not to mention the overbearing demand on infrastructure, roads, and health services. Is the air thinner in Canberra?

(Sardonically, they also state ‘improved social cohesion’ as one of the reasons for current migration levels, conveniently ignoring the fact that most Australians want less migration.)

Big business finds the government’s positive tone towards migration numbers highly agreeable. Of course they would, they’re the ones benefiting from it. To understand how, one simply needs to listen to their frequent and vocal calls for an even higher migration intake to do things like ‘boost productivity’ and, bizarrely, ‘increase wages’.

For years, Australians have asked for a reduction in migration so that housing, wages, and infrastructure can all have a much-needed breather. Yet time and again the government has blatantly ignored these calls, instead upping the numbers. If they’re not listening to us, maybe they’re listening to the people who benefit most from migration. You’ll find them on the donor list.

Money talks.

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