If you have a growing number of people
with growing incomes
on the same amount of land,
the cost of that land is going to keep going up.
It's that simple.
The great Australian dream,
a quarter acre suburban block,
a garden,
a Hills Hoist
and a barbecue.
Providing the foundation for family and social stability.
50 years ago, if you lived in a capital city,
this would set you back around $20,000.
A lot of money back then,
about four times the average annual salary.
But it was a prosperous time in Australia.
Up to 75% of us lived in a home
we could call our own.
Fast forward 50 years and the average house price
in an Australian capital city
has reached a milestone whole number.
One million dollars.
Despite all the talk lately of plummeting house prices.
The fact remains that in 2023,
with most households now being dual income,
no matter how much you cut back on your daily flat white
and avocado toast,
you will pay 11 times the average annual salary for your house
or 175% more than your parents paid for theirs.
And by your house I mean a two-bedroom unit.
All right, maybe a one-bedroom unit.
So what happened?
To try and get our heads around
what has led to these astronomical price rises,
let's call Evan Thornley.
He's the executive chair of Longview
and knows a thing or two about property prices in this country.
Evan, house prices used to cost four times our salary,
now they cost 11 times our salary.
What the hell is going on with house prices?
Look, what I’d tell you in a nutshell is
Australians live in a small number of places.
More than half of us just live in three major cities.
They're not making any more land.
As we have more people
and those people earn more money
as we've gone from one-income households
to two-income households.
The amount of money people can spend on a home is rising
and the amount of land that's available stays the same,
which means the price of the land keeps going up.
I was thinking the history of this
in our grandparents’ day
in many cases they probably saved up
for a number of years and bought a home for cash
and then banks and mortgages started coming along
and people could save a bit of money
and then get a mortgage from the bank,
usually on one income, and buy a home.
Then we moved into a time when people were getting
two incomes in the household,
and so that gave those people more money to buy a home,
which put them in an advantage over the people with one income.
So then you have two incomes
and a mortgage to buy a home.
Now we're at the stage where increasingly you need two incomes
and a mortgage
and usually somebody else to help you out,
like the bank of mum and dad,
or now the government is introducing
shared equity schemes.
My perspective is
unless you want to change the demographic
and population policy of the country
and ironically the continued economic growth of the country,
you won't change the fact that the value of land
and therefore the houses that sit on that land will keep going up.
You can't actually stop that happening.
So what we need to do is acknowledge
that that's the truth
and find mechanisms that allow people
to get into the housing market
because then they become beneficiaries of it.
So what about interest rate rises,
isn't that bringing down the cost of houses?
Yeah look, interest rates go up and down
and they have done
since the beginning of mortgages.
But in Australia house prices over the long term
just keep going up.
Even when interest rates go up,
house prices in the long term go up.
When interest rates go down,
house prices in the long term go up.
When interest rates are flat,
house prices in the long term go up.
So house prices will keep going up,
obviously the impact of interest rates changes
at different points in time
and it makes it easier or harder for people.
Right now we're in one of the hard phases
and so particularly for people that have recently bought,
that's very difficult.