Immigration is the key factor says economist
In the heat of a federal election campaign, housing policy has become a battlefield once again. Political leaders are pitching bold promises and glittering schemes to help young Australians climb the property ladder. But behind the buzzwords and voter-friendly slogans, the numbers tell a far bleaker story.
If house prices continue on the trajectory endorsed by both major parties — growing slowly while wages inch forward — Australia could be waiting until 2095 to see housing become truly affordable again.
That is not a typographical error. Seventy years.
And yet, not one major party leader has dared to suggest that house prices should fall — a silence that economists warn speaks volumes.
The Elephant in the Living Room
Opposition Leader Peter Dutton and Prime Minister Anthony Albanese have made their positions plain: they don’t want home prices to drop.
“I want to see [home prices] steadily increase,” Dutton said in the second leaders’ debate. “I don’t want to see a situation where Labor crashes the economy and somebody who’s paid $750,000 for a house today is worth $600,000 in 18 months’ time under an Albanese-Bandt government — that would be a disaster.”
Albanese, while less direct, echoed a similar sentiment during a radio interview: “Historically in Australia … prices tend to rise. What we want to do is to make sure that people have accessibility for home ownership.”
Neither man wants to say what is plainly understood by those locked out of the market: if home prices keep going up, so does the bar for entry.
A mathematical reality check
Economist Saul Eslake, long a prominent voice in the housing debate, has called out what he sees as the central delusion: the idea that affordability can be restored purely by letting incomes “catch up” to prices.
“This might sound nice, but it’s actually a con,” he said to The Guardian.
Let’s do the maths. At the end of 2024, the median capital city house price was $933,000 — 12.8 times the average adult income of $73,000. Back in 2000, the ratio was 6.5, with a median house costing just $178,000.
Assuming house prices grow by 2.5 per cent annually — in line with the Reserve Bank’s inflation target — and wages grow by 3.5 per cent, the ratio won’t return to 6.5 until 2095.
That is, assuming the economy behaves perfectly for seven decades.
And, as Eslake dryly observes, “Even then, factoring in house price growth of only 2.5% a year is a heroic assumption.”
Read more: Property levies rise as Australians struggle for a place to live
Over the past 20 years, property prices have risen at more than double that pace, increasing at a compound annual rate of 5.4 per cent. The result? An intergenerational chasm in wealth and opportunity, with younger Australians increasingly locked into rental cycles or forced to rely on parental support to buy a home.
A cycle reinforced by policy
Australia’s political and economic system has quietly but decisively placed homeownership at the centre of its wealth-building engine. Nearly every government of the past two decades has offered grants, tax breaks or deposit assistance schemes for homebuyers. But these policies have often acted to inflate prices further, helping buyers bid up property — and enriching those already in the market.
Ironically, the very policies now being touted as “solutions” — such as the first homebuyer grants from both major parties — are recycled versions of measures that contributed to the problem in the first place.
“Throwing more taxpayer money at the housing bubble is utterly reckless,” economist Leith van Onselen said recently in response to Labor’s latest scheme to drop the 20% deposit requirement for first homebuyers.
The Coalition’s counteroffer — tax deductions on mortgage interest for newly built homes — is equally fraught, experts warn. Without a plan to boost construction, it simply channels more money into an already tight market.
A nation built on housing wealth
Australia’s love affair with property runs deep. For most households, their home is their biggest asset. Excluding superannuation, residential property accounts for the majority of household wealth.
That mindset is politically potent. Over 11 million Australians own property, and 2.25 million hold investment properties. Only a few hundred thousand people attempt to enter the housing market each year.
The electoral arithmetic is clear: protecting existing owners is good politics — even if it’s bad policy.
Can Affordability Be Engineered?
Eslake, along with other economists, concedes that a sudden plunge in house prices would be disruptive and potentially catastrophic if driven by unemployment or economic collapse — as happened in Spain, Ireland and the United States after the Global Financial Crisis.
But he argues that a controlled fall in prices of five to 10 per cent over three years would “do more to boost affordability than anything any government has done in the past 60 years”.
Read more: 'House prices will undoubtedly skyrocket' – Economist
Governments may not be able to engineer that outcome — but Eslake insists they must stop actively resisting it. “At the very least,” he said, “they should not step in to prop up prices when they start to decline, which is exactly what they’ve done in the past.”
Could cutting immigration ease Australia’s housing crisis?
As house prices soar and affordability metrics reach historic lows, a growing number of economists are asking whether reining in immigration could provide a circuit-breaker.
Australia has experienced the fastest population growth among advanced economies this century — a trend that has fuelled demand for housing and outpaced supply. According to projections from the Centre for Population, the national population is expected to swell by 13.5 million over the next 40 years, effectively adding another Sydney, Melbourne, and Brisbane.
Economist Leith van Onselen argues this trajectory is unsustainable. In a recent column in macroeconomics, he contends that instead of encouraging further price rises to entice developers — as some industry figures like Michael Yardney have proposed — Australia should confront the demand side of the equation.
Read more: Housing affordability across federal electorates revealed
Van Onselen outlines a compelling case: reducing immigration could allow housing supply to catch up, lift rental vacancy rates, slow rent inflation, and help prospective buyers save for deposits more quickly.
Perhaps most critically, fewer new arrivals would ease direct upward pressure on home prices, making ownership a more realistic goal for younger Australians.
The logic is simple: fewer people competing for the same housing stock should translate to softer prices — or at the very least, slower growth.
In contrast, Yardney argues that developers won’t build unless home prices rise 15–20%, claiming that profitability is essential to addressing the shortage.
But critics warn that relying on higher prices to spur supply is a double-edged sword. It might incentivise development, but it deepens the affordability crisis in the short term, locking out the very people policies claim to help.
Blueprint from across the ditch
One of the most compelling case studies in housing reform isn’t in Europe or the US — it’s in Auckland. Facing its own affordability crunch, the New Zealand city embarked on a radical rezoning initiative, lifting height limits and increasing density.
The result? More apartments, more construction, and in relative terms, lower prices and rents than the rest of the country.
Looking beyond 2025
As the election campaign rolls on, there is no shortage of talk about “supporting first homebuyers”. But whether it’s grants, deposit guarantees or tax breaks, the central tenet of housing policy remains unchanged: demand-side handouts with minimal supply-side reform.
Unless that changes, the idea of affordable housing may remain just that — an idea. A flickering dream that floats further into the future with each passing year.
By the time that future arrives — sometime around 2095 — many of today’s renters may no longer be around to enjoy it.
Pouring fuel on a (dumpster) fire
A quick primer on what’s on offer for voters in this election
Labor Party (ALP)
Key Policy: Expanded first-Homebuyer Guarantee Scheme
- From January 2026, all first homebuyers, regardless of income, will be eligible to:
- Purchase a home with a 5% deposit, and
- Avoid Lenders Mortgage Insurance (LMI), which can save buyers upwards of $20,000
- The government will guarantee the remaining 15% of the loan
- Aims to broaden access to the market, but is expected to increase demand and may further inflate house prices.
Social and Affordable Housing Commitments
- Pledged $10 billion to build 100,000 homes over eight years in partnership with state governments and developers
- Criticised for being too slow to address immediate supply constraints
Liberal-National Coalition (LNP)
Key Policy: Tax Deductions on Mortgage Interest
- First homebuyers will be able to claim tax deductions on interest paid on mortgages up to $650,000 for newly constructed homes
- Income caps: $175,000 for individuals, $250,000 for couples
- Framed as an incentive to encourage new housing supply, though experts warn it may still drive prices higher without a matching supply response
Affordability Position
- Explicitly opposed to house prices falling
- Promotes “sustainable growth” — slow price rises that lag behind wage growth
The Greens
Key Policy: House Price Stagnation for Affordability
- Supports house prices staying flat while wages rise — a middle ground between inflation and sharp price drops
- Would take roughly 20 years to return to early 2000s affordability under this plan.
- Advocates more ambitious public and affordable housing builds than Labor or the Coalition
Broader Housing Platform
- Has consistently called for large-scale public housing investment
- Supports rent controls, vacancy taxes, and limits on property investors to ease pressure on the market
Independent and Crossbench Voices (e.g. Teals, Centre Alliance)
- Varying positions, but generally:
- Support zoning and planning reform to encourage higher-density housing.
- Advocate for climate-resilient, affordable housing initiatives.
- Open to reining in negative gearing and capital gains tax concessions to cool investor-driven price growth.
