Squeezed out of the Australian dream: Two-thirds of young people are giving up on home ownership

Young Australians and middle-income earners have given up on ever buying their own homes amid mounting evidence the nation’s dysfunctional housing system is destabilising the entire economy.

An exclusive Resolve Political Monitor poll shows two-thirds of the 1609 people questioned agree that young Australians will never be able to buy a home.

Young Australians and middle-income earners have given up on ever buying their own homes.Credit:

Among those who do not already own a home, 63 per cent of low-income earners and 54 per cent of those on middle incomes believe they will forever be shut out of the property market that is among the most expensive in the world.

The poll was taken as part of a series this masthead begins on Monday by posing the question: Has Australia’s love affair with housing so distorted the economy that it is at the heart of the problems plaguing our cities, our governments and our way of life?

Experts believe the nation’s living standards and productivity performance are being harmed by the way the property sector commands a growing proportion of consumers’ incomes and distorts the way businesses and employees make key economic choices.

Since 2005, the mortgages held by the nation’s four big banks have climbed from $364 billion, or 25 per cent of gross domestic product, to almost $1.6 trillion or 70 per cent of GDP.

In Sydney and Melbourne, over the same period, the median house price has climbed 3.5 times the inflation rate and 2.5 times the increase in average weekly earnings.

So serious are the problems there are fears Australia could become a “Jane Austen world” where wealth will be determined by parents’ housing portfolios, and people are forced into choosing between buying a home and having children.

Long-time housing policy critic, independent economist Saul Eslake, believes policy missteps over the past three decades have contributed to a situation that is undermining the living standards of future generations.

“I don’t understand why younger people today aren’t out on the streets, protesting against their parents and their grandparents for what they’ve done to the cost of housing in this country,” he says.

The Resolve poll found it is not just house prices. Forty-two per cent of renters said their rent had gone up this year, with an average increase of $77 a week. Another 20 per cent said their rent lifted in 2022.

Resolve director Jim Reed said high house prices and rents meant younger people were being squeezed by not buying and stretched if they did manage to purchase a home.

“They are buggered if they do and buggered if they don’t,” he said.

“My researchers in this area tell me that many young people have simply given up on the dream of owning a home, at least in their early careers, and some are even telling me that they are giving up on having a family because they can’t afford to look after themselves, let alone more mouths.”

The poll found wide support for a range of ways to increase housing affordability, but that support varies depending on how it affects survey participants’ local communities.

Seventy-two per cent of people support encouraging more homes to be built in new suburbs outside city centres.

Support fell to 51 per cent to relax planning rules to allow more homes outside a person’s local area. This dropped to 41 per cent if laws were eased to allow more homes in a person’s own suburb.

Labor went to the 2019 election with plans to restrict negative gearing concessions. The Resolve poll shows 49 per cent support for capping the number of investment properties a person can own while 54 per cent backed axing negative gearing for any properties bought after a certain date.

Productivity Commission chair Michael Brennan says the affordability of housing was hurting the overall economy.

“The ability to house people close to job opportunities, and for firms to locate close to skilled labour, is the equivalent of mining or manufacturing firms locating close to raw materials or port infrastructure – the key difference being that the location of skilled workers is based on individual choices and shaped by policy,” he said.

Housing is also affecting how economic policy in the country is set. The recent review of the Reserve Bank found one of the reasons it did not cut interest rates in the period between 2016 and 2019 was due to concerns cuts would only increase the levels of debt carried by Australians.

That decision resulted in more Australians out of work.

“Higher interest rates likely contributed to below-target inflation and higher unemployment than otherwise,” the review found.

ANU demographer Liz Allen said the increased insecurity of housing was a factor in the delay of young Australians partnering with others which then affected decisions on when to start a family.

“If you have increasing housing costs then home ownership becomes less affordable, [and] that’s likely to have an impact on relationship development and the decision on parenting and number of children,” she said.

The Grattan Institute’s Brendan Coates said young Australians faced a plight not all that different to the world portrayed by Jane Austen in books such as Pride and Prejudice.

“The biggest issue is one of equality. We’re moving back to some sort of Jane Austen world where wealth is less about your work and innovation and more about how much land you have or inherit,” he says.

“It’s moving back to the world of inherited wealth that comes from land or a house, to the sort of world we had in the 19th century.”

NEXT: How the Great Australian Dream turned the Australian economy into a house of cards

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