This decline comes at the worst possible time. Cost-of-living pressures have tipped an increasing number of Australians into housing stress. Some families, unable to afford skyrocketing rents, are now living in tents and campervans.
The last Rental Affordability Index indicated 40 per cent of low-income households are in rental stress, and struggle to pay for basic essentials such as food. Contrary to conventional wisdom, the rental affordability has decreased faster in the regions than the cities, and Hobart (not Sydney) is now the least affordable city for renters due to insufficient housing supply.
One does not have to be an economist to understand when demand for something increases, so does the price. Most Australians are happy to welcome migrants, and understand high immigration policies are necessary in order to offset our ageing population. Australia cannot pay for the healthcare of baby boomers without a steady influx of highly skilled workers willing to pay high taxes.
Nevertheless, since 2005 Australia’s net overseas migration has averaged 200,000 people a year. That’s two million people in 10 years. Our housing supply has not been able to keep up. We have one of the most successful multicultural nations in the world and every Australian I know is proud of it. Yet, while our skilled immigration policy has many benefits, it is having the second-order effect of driving up rents and pricing locals out of the housing market.
Young professionals raised by parents with a high school education now find themselves unable to afford homes in the cities they grew up in. Despite studying and working hard, many young Australians feel as if they are downwardly mobile, due to factors entirely outside their control. On the subreddit r/AusFinance, a recent post captures the problem: “Has anyone else seen the rise of this? Otherwise extremely intelligent and hard working people who have just decided that the social contract is just broken and decided to give up and enjoy their lives rather than tread the standard path? … For context, a family friends son 25M who’s extremely intelligent, very hard working as in 99.xx ATAR, went to law school and subsequently got a very good job offer in a top tier firm. Few years ago just quit, because found it wasn’t worth it anymore.”
This post attracted thousands of comments, with countless stories of young people who had excelled in school and university but who were left demoralised by their inability to own a home.
“My mum didn’t finish high school. Has a nice old Queenslander while working part time at a daycare. I’m a scientist, but will never own my own house no matter how much I scrimp and save,” said one commenter.
“My parents bought the house we lived in for 60 grand, it’s now worth north of two million,” said another. “If you give me the trade deal of eating slightly shittier quality food, having to go to a cinema or having ads on my TV … and in return I get a housing market like my parents got I’d take it in a heartbeat. I earn more than what my parents earned combined at the same age, even accounting for inflation and I don’t have a chance of getting a house around the same neighbourhood.”
The past 10 years of record-breaking immigration correlates almost perfectly with the explosion in house prices in our capital cities. Today, Sydney’s median house price is 15 times the average household income. Highly skilled migrants with higher-than-average wages take advantage of tax offsets for properties just like other wealthy Australians do. And unlike in the US where entrepreneurship and innovation are seen as the pathway to fortune, many come to Australia to make “big money” through property speculation.
Those who grew up and went to school in Sydney or Melbourne have to compete with thousands of international millionaires who arrive each year on our fast-tracked “millionaire visa”, which essentially sells residency for a price. In 2022, 3500 millionaires arrived here, more than double those migrating to the US. The only country receiving a higher number of millionaires last year was the UAE.
The long-term implications of our housing crisis are unlikely to be positive. Researchers know high house prices depress the birthrate in those who are renting, so it is no surprise that ours, well below replacement level at 1.58 births per woman, is the lowest ever. The Albanese government’s plan to build more public housing is a step in the right direction. But until supply catches up, we need to think about reining in the number of new arrivals. We can’t simply build immigration policies around the needs of big business forever.
There is no doubt high immigration helps our economy and it will ensure our baby boomer generation have the nurses and care workers to age with dignity. But this must be sustainable and balanced with the housing needs of young people of the working and middle classes. They should be seen as the base of our future human capital and they need to be able to buy their own houses and to start their own families.
Claire Lehmann is founding editor of online magazine Quillette.
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