For the first time in Australian history, the average home price has cracked $1 million. Depending on your situation, that’s either a symbol of economic strength—or a sign that the housing market has completely lost the plot.
This milestone reflects far more than inflation or a red-hot real estate market. It’s a reality check on the deepening disconnect between what homes cost and what people earn.
🚨 Post-Pandemic Price Surge
Let’s rewind to the early 2020s. Since the onset of the pandemic, the cost of building homes has exploded:
- House construction prices have risen 42.4%.
- Apartment builds are up 27.4%.
While recent data shows some easing—house construction growth has cooled to just 1.1% annually (below the 10-year average of 2.6%)—apartment construction costs are still rising at around 4.0%, well above their long-term trend.
What’s making it worse? Red tape and taxes. According to the Housing Industry Association (HIA), 41% of the cost of a new house-and-land package is eaten up by government charges and compliance. That’s not just inefficiency—it’s structural inflation baked into every home.
💸 Interest Rates and Real Estate: A Weak Link
There’s a common myth that interest rates directly drive house prices. But that link is looser than most think. The Reserve Bank of Australia (RBA) sets rates based on the broader economy, not just housing. So while borrowing costs do affect buyer behaviour, the housing market isn’t a priority lever—it’s just one moving part.
🏙️ Higher Prices = More Apartments?
Oddly enough, sky-high house prices could have an upside: They make apartment projects more viable. When land and detached homes become unaffordable, developers are more likely to build up than out. That could help alleviate supply shortages, especially in high-demand urban areas.
Still, not everyone’s cheering. Critics argue that rising prices push ownership out of reach. But others counter that increased density means more rental and ownership options for people in need, and that’s the bigger priority.
Both points are valid. It’s a classic affordability-versus-accessibility trade-off.
📉 Wages vs Prices: A Bleak Ratio
Let’s get to the heart of the issue.
Since 2011:
- House prices have more than doubled—up 102%.
- Average individual income has grown just 48.3%.
That’s why the house price-to-income ratio has ballooned to nearly 9 times annual earnings—a figure that would have seemed absurd just a decade ago.
With GDP crawling at 0.2%, some economists are whispering the dreaded phrase: per capita recession. And while the government has acknowledged the productivity problem, it hasn’t exactly been bursting with policy solutions. The Prime Minister recently called on Australians to submit their ideas.
When it comes to wage growth, we’re all still waiting at base camp while productivity climbs Everest—in budgie smugglers.
🛠️ What Can Actually Help?
If we’re serious about improving housing affordability, two strategies matter most:
- Boost productivity and innovation to drive real wage growth.
- Cut excessive taxes and red tape while increasing housing supply to slow price growth.
A more immediate, practical idea? Expand the First Home Owner Grant to include established homes, not just new builds. In older suburbs, townhouses and walk-up apartments could offer affordable entry points—if buyers had a little help crossing the deposit line.
🎩 The Millionaire Standard Isn’t What It Was
There was a time when becoming a millionaire felt like a crowning financial achievement.
Today, it’s the going rate for a basic house.
What that says about the economy—or about what we value—is still up for debate. But for millions of Australians locked out of the market, it’s less about symbolism and more about survival.
