Here is the number that should end the debate about whether Australia’s housing policy is working. A typical household earning around $125,000 a year could afford just 12 per cent of the homes sold in the 2026 financial year. Five years ago, that same household could afford 43 per cent. It is the lowest proportion on record. Two decades of housing policy, from governments of both persuasions, has produced this. Here’s the plain-language guide to how we got here and what the evidence says would actually help. [PUBLISHING NOTE: figures move; confirm the latest affordability and Accord data before publishing.]
The Scale of the Collapse
The affordability picture has deteriorated faster than most people realise.
The drop from 43 per cent to 12 per cent in five years is not a gentle decline, it is a collapse. And it isn’t only lower-income households feeling it. Even Australia’s highest-earning 20 per cent now face affordability levels comparable to what median-income households experienced decades ago.
The underlying numbers explain why. Home values surged roughly 47 per cent between March 2020 and recent measures, adding around $280,000 to the median dwelling value. Servicing a new loan now consumes around 45 per cent of household income, when anything above 30 per cent is formally considered housing stress. Australia sits in the “severely unaffordable” category on international comparisons, with some of the most expensive housing in the developed world.
The Policy That Keeps Backfiring
Here is the uncomfortable pattern, and it is not a partisan observation, it has happened under both major parties for twenty years.
The go-to political response to unaffordable housing has been to give buyers more money. First home owner grants. Stamp duty concessions. Deposit guarantees. Shared equity schemes. Each is announced as a measure to help people into homes, and each is genuinely popular.
The problem is what happens next. When you increase how much buyers can pay without increasing the number of homes available, the extra money flows into higher prices. The buyer who gets in early benefits. Everyone who comes after faces a higher entry price. Two decades of first home buyer grants show the same consistent pattern: each round briefly boosts first home buyer activity, then translates into higher prices, delivering windfall gains to existing owners.
This is not a fringe view. The International Monetary Fund has called for the withdrawal of Australia’s expanded deposit scheme on precisely these grounds, arguing it drives property prices up. And the data since the scheme expanded supports the concern: properties below the scheme’s price caps have recorded stronger growth than higher-priced homes, and the pool of suburbs cheap enough to qualify has been shrinking as a result.
The Supply Failure Underneath It
The reason demand-side help keeps backfiring is that the actual constraint sits on the supply side, and that is where policy has failed hardest.
The arithmetic is brutal. In 2023, Australia’s population grew by around 600,000 people while dwelling approvals came in at roughly 167,000. The stock of social housing, around 400,000 dwellings, has barely grown in twenty years. Australia has just over 400 dwellings per 1,000 people, among the lowest housing stock per adult in the developed world.
The federal government’s National Housing Accord targets 1.2 million new well-located homes in the five years to June 2029, which is a genuine attempt at the real problem. But approvals have been falling, not rising, and the target is widely regarded as unlikely to be met on current trends. Announcing a supply target is not the same as delivering the homes.
What the Experts Actually Say
The most striking evidence came this month from a Senate select committee on intergenerational housing inequity, where the country’s senior economists were blunt.
“Meaningful improvements in affordability will only be achieved through a sustained increase in housing supply over a long period,” NAB chief economist Sally Auld told the committee.
She added that this is a challenge likely to take “the better part of a generation” to resolve. Notably, she also warned that the current price falls, NAB forecasts a peak-to-trough decline of around 7 per cent, will not solve affordability, because higher borrowing costs have cut purchasing power by more than cheaper prices have helped.
That is worth sitting with. Even a meaningful fall in house prices is not fixing this, because the affordability problem is structural, not cyclical.
Modelling from the Grattan Institute points the same way: building an extra 50,000 homes a year for a decade would leave national prices and rents 10 to 20 per cent lower than they otherwise would be. Supply, sustained over years, is the lever that works.
In Fairness, What Is Being Attempted
A fair account has to acknowledge the other side. Governments are not doing nothing. The Housing Accord sets a real supply target. There is new investment in social and affordable housing. The recent changes to negative gearing and capital gains tax deliberately steer investor tax concessions toward new builds rather than existing homes, which is at least aimed at adding supply rather than bidding up what already exists.
There is also genuine disagreement about those tax changes. Critics argue that reducing investor participation risks shrinking rental supply, since everyday investors provide most rental housing, and that investors may simply step back rather than redirect into new construction. That concern deserves to be tested rather than dismissed, and the coming years will show which reading was right.
What This Means for You
If you are trying to buy, the honest position is that policy is unlikely to rescue you in the near term, so plan on your own numbers. Understand that schemes helping you buy with a small deposit are real and useful individually, even while they push prices up collectively, so use them if you are eligible, but do not over-extend on the assumption that prices only rise. Stress-test your borrowing against higher rates.
If you are renting, the supply shortage driving your rent up is the same shortage driving prices, and it is not resolving quickly. Know your state’s rules on increases and vacancy rates in your area before a renewal negotiation.
And if you are voting, the evidence is reasonably clear about which policies move the needle. Measures that add homes work slowly but durably. Measures that give buyers more money work instantly and then make the problem worse. This is general information, not financial advice.
The Bottom Line
A household on $125,000 able to afford just 12 per cent of homes sold, down from 43 per cent in five years, is the clearest measure yet of two decades of policy failure across both sides of politics. The mechanism is not mysterious: governments keep boosting what buyers can pay without boosting how many homes exist, and the extra money lands in prices. The economists giving evidence to Parliament this month were unanimous that only sustained supply fixes it, and that it will take the better part of a generation. Anyone promising a quicker answer is selling something.
Epik Wire covers the property market in plain language for buyers, renters and owners. Subscribe to our newsletter to stay informed.
