Houses are too expensive to buy, but that’s not the problem

When we talk about housing affordability in Australia, we often frame it as though the system is inherently broken. And if something is broken, it becomes something we need to fix.

But I want to challenge that perspective. What if, instead of seeing housing affordability as a problem to solve, we started seeing it as a reality to adjust to? Let me explain.

Ever since the postwar housing boom in the 1950s, Australians have come to believe that property ownership should be the default position. That owning the place we call home is the norm. But in many other parts of the world being saddled with a mortgage is not the rule, it’s the exception.

The housing problem in Australia will take decades to sort out, experts say.Credit: Getty Images, digitally tinted

In Germany, for example, less than half the population own their own home (46.7 per cent, as of 2022). In Switzerland, the rate of ownership is even lower, at just 35.9 per cent. In Australia, it’s just over two-thirds of the country – 67 per cent. Yet, despite this huge difference in housing, both these other nations are places with high standards of living and thriving economies.

According to the OECD’s Better Life Index, German citizens earn salaries that are roughly 25 per cent higher than the OECD average. Both their employment and education rates are higher than the norms.

Their life expectancy rates are on par with the OECD average of 81 years, and they spend 20 per cent of their gross disposable income on keeping a roof over their heads. Germany also happens to boast the third-largest economy in the world.

Similarly in Switzerland, the salary average is 26 per cent higher than the OECD norm, while their employment and education rates are among the highest in the world.

They also outperform on life expectancy, with their national average of 84 coming in three years over the standard. When it comes to housing, they’re spending just 1 per cent more than their German neighbours, allocating 21 per cent of their gross disposable income to this expense.

Comparatively, Australians earn slightly less (about 20 per cent more than the OECD average). We also lag by a couple of percentage points on both employment and education, but we surpass the life expectancy average by two years, and the average portion of our gross disposable income spent on secure housing is 19 per cent.

Given how similar so many of these key benchmarks are across all three nations, it’s interesting to consider just how different our cultural mindset is when it comes to housing and homeownership.

For a home to be deemed affordable, it should generally take up no more than 30 per cent of a household’s income. But according to PropTrack’s 2023-24 Housing Affordability Report, as of right now, an Australian family with a median income of $112,000 can afford only 14 per cent of housing nationally.

For Victorians, that figure drops to just 12 per cent of homes sold in the last year being affordable, while in NSW, it’s worse at just 10 per cent.

In Australia, many of us still see renting as something of a stop-gap. It’s what we do after finishing school, before settling down. It’s a milestone many of us feel the pressure to reach before we start a family of our own.

But in Germany and Switzerland, renting is not seen as a failure at all; it’s simply how the system works.

One of the well-known benefits that makes the rental system infinitely less stressful for residents in Germany is their long lease options. Unlike Australia, where the average tenancy agreement is 12 months, in Germany, an average tenancy agreement can be for anywhere between two years and two decades.

Despite negative gearing, rents have soared over the past two years.Credit: Bloomberg

Another key difference is who invests in property. In Australia, the vast majority of private residences are owned by individual property investors. Because of this, people who rent are ultimately at the mercy of their landlord.

In Europe, however, it’s far more common for companies and corporations to invest in long-term build-to-rent schemes. This alone speaks to one of the main issues that has plagued Australia’s growing affordable housing crisis for years – the policies we do have, and the policies we don’t.

Add to this the never-ending confusion around what is a state government issue and what is a federal issue, and you’ve got the big old mess we’re drowning in today. For one example, take this: The Australian Bureau of Statistics found on census night in 2021 that more than 1 million homes across Australia were empty. Of the 10.8 million homes counted, that’s 9.6 per cent of them sitting empty.

In Germany, where there are much clearer legislated protections for renters, and policies to support commercial investment in affordable housing, the rate of empty houses was just 4.3 per cent at the time of their census in 2022. Switzerland fared even better in their most recent census in June, where just 1.08 per cent of properties were vacant – or 51,974 homes.

In their paper “Australia’s Housing Crisis: How did we get here and where to now?” experts from the University of Queensland succinctly write: “On one hand, we have disinvested in social housing and other forms of housing that are affordable. And on the other, there has been a lot done as the policy level to ensure housing is a commodity to be speculated. Not simply a means for people to live, housing is a vehicle through which to become wealthy.”

But here’s the thing. Homeownership is just one of many paths to financial security. With strong policies to ensure renters are better protected, the opportunity to still live fulfilling lives is very much on the table.

And with that comes the opportunity to invest in different ways. Just because property was the money story of your parents or grandparents doesn’t mean it has to be yours, even if you grew up thinking that it did.

Victoria Devine is an award-winning retired financial adviser, bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. Victoria is also founder and co-director of Zella Money.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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