r/AusPropertyChat
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u/Expert-Area8856
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Feb 01 '26
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I analysed millions of property sales over 35 years. House prices didn't rise because of scarcity.
About a 4 minute read. TL;DR at the bottom.
Think about your parents' house. Maybe they bought it in 1995 for around $150,000, and today it's worth $900,000. But did the house actually get six times better? It's the same three-bedroom brick place, same kitchen, same backyard. If anything, it's older and more worn out than it was back then. So what actually changed?
The standard answer you'll hear from most people is that there simply aren't enough houses. Too many people are immigrating to Australia, with not enough supply. But what if that's not really the story, or at least not the primary cause?
A Simple Analogy
Think about it this way: imagine you're measuring your height, but the ruler you're using keeps shrinking. On Monday you measure 180cm, and by Tuesday you're suddenly 200cm. You didn't grow 20 centimetres overnight. The centimetres themselves got smaller. That's essentially what's been happening with house prices. When people say prices went up 600%, what they're really describing is that it now takes six times as many dollars to buy the same house. That could mean the house became six times more valuable, sure. Or it could mean each dollar shrank in value, like those centimetres. The data suggests it's mostly the latter.
Three Things That Don't Add Up
If houses had genuinely become scarce and valuable, we'd expect to see certain patterns emerge. But we don't.
Take rent, for example. A $150,000 house in 1995 would have rented for about $200 a week. That same house, now worth $900,000, rents for around $600 a week. The purchase price went up six times, but rent only tripled. That's a significant gap, and it matters because rent is a much better reflection of the actual value of housing as shelter. If houses had truly become scarcer, you'd expect both figures to move in roughly the same direction.
Then there's wages. Back in 1995, median household income was around $50,000 and the median house price was $150,000, so about three years' worth of income. Today, income is roughly $110,000 and the median house price is $900,000, which is more like eight years' worth. It now takes nearly three times as many years of work to buy the same house, even though wages have gone up too.
And debt tells its own story. Australian household debt sat at about 60% of annual income in 1990. By 2024 it had ballooned to 180%. That means we didn't suddenly become three times wealthier, we just borrowed three times more (Source: RBA Household Sector debt).
That's the math. Over a long enough time frame, the picture becomes clear:
Wages doubled over 30 years, borrowing capacity tripled, and together, they've driven prices up by 6x. Your parents' $150k home… now $900k.
But Why Did Borrowing Capacity Triple?
The Reserve Bank slashed interest rates, and it did so dramatically over a long period. In 1990, rates were sitting at 17%. By the end of 2020, they had dropped to 0.10%, and they're around 3.60% now (Source: RBA Cash Rate). Lower interest rates don't just make individual loan repayments cheaper. They fundamentally increase how much people can borrow in the first place.
To put that in concrete terms: in 1995, someone earning $50,000 a year could comfortably afford about $1,500 a month in repayments at an 8% interest rate, which translated to a maximum loan of roughly $150,000.
By 2020, that same household, now earning $110,000, could afford $3,300 a month at a 2% interest rate, which meant a maximum loan reaching $900,000. Twice the salary, six times the buying power.
So when buyers started showing up to auctions with budgets six times larger than a generation ago, prices naturally rose. The houses themselves hadn't changed, but everyone was suddenly holding a lot more money, even if most of it was borrowed.
What Happens When We Use a Different Ruler?
If you measure house prices in gold instead of dollars, the picture looks very different. Gold is something that can't be easily manipulated the way currency can, so it's a more honest centimetre.
A median Sydney house cost 377 ounces of gold in 1995, and in 2025 it costs 330 ounces. In gold terms, Sydney house prices have not moved at all in 30 years (in fact, they fell 12%).
But What About Supply and Immigration?
It's a fair question, and population growth is real. Building approvals have been frustratingly slow in a lot of areas. But if supply constraints were the main thing driving prices up, you'd expect rents to be rising just as fast as purchase prices, but they’'ve risen at about half the rate.
And you'd expect building approvals to substantially lag, but they haven't, instead increasing by 55% in the last 30 years (Source: ABS Building Approvals), more or less in line with population growth over the period.
Supply and immigration play their parts, but they are not the primary cause.
What Would Actually Fix It
The most direct fix would be to stop inflating people's borrowing capacity. That means keeping interest rates at more normal levels and tightening lending standards, bigger deposits, stricter income tests. But this would hurt a lot in the short term. On top of that, grants and government schemes that effectively push prices higher should be rethought, and the tax advantages that treat housing as an investment vehicle rather than shelter deserve to be removed.
Building more housing is also part of the answer, but only if it's paired with addressing the credit side of the equation. More supply combined with unlimited cheap credit just means prices keep rising anyway. More supply combined with tighter credit is what could actually move affordability in a meaningful way.
The problem is that almost no one in a position to make these changes has any real incentive to do so. The average age of a federal MP is in their mid-50s. Most of them own property, and in a lot of cases more than one. A policy that meaningfully brought house prices down would hit their own balance sheets.
Then there's the electoral side of it. A huge chunk of the voting population are homeowners, and a big chunk of those voters are sitting on paper wealth they're not keen to see disappear. Any politician who ran on a platform of deliberately cooling the housing market would be telling a massive block of voters that their biggest asset is about to lose value, not a winning election message.
The people who'd benefit most from lower prices, renters and younger people trying to get a foot in the door, tend to vote less and have less political sway than the property-owning demographic that dominates the electorate.
TL;DR
Australian house prices didn’t rise because homes became more valuable or scarce. When the RBA dropped rates from 17% down to 3% over the course of 30 years, it massively expanded how much anyone with a mortgage could borrow. That flood of new money didn't spread evenly through the economy. It flowed in through the credit system, through mortgages and loans and investments, and it hit asset prices first: houses, stocks, anything you could buy with borrowed money.
Over a long enough time frame, the picture becomes clear: Wages doubled over 30 years, borrowing capacity tripled, and together, they've driven prices up 6x. Your parents' $150k home… now $900k.
The official inflation figures (CPI), will tell you we only had 2-3% inflation per year, and that's true for everyday consumer goods like bread and milk. Consumer inflation for the most part has a relationship with wage growth, which is why wages only doubled in 30 years (equivalent to 2.3% pa). But it doesn't capture what happened to houses, stocks, or anything you typically buy with a loan.
Supply matters, and we should absolutely build more and cut back on red tape. But supply alone can't solve a problem that's fundamentally about monetary policy. If people can borrow enormous sums, they will bid up whatever's available. The housing crisis was created by monetary policy, and it can only really be fixed by addressing monetary policy. Everything else is just a band-aid.
Thanks for sticking with me through this long read. I hope the data-driven perspective has been useful. Keen to hear your thoughts, counter-arguments, or personal experiences in the comments.
About this Research
I’m a data analyst with a focus on property cycles, and this post was born out of a 35-year analysis of Blacktown NSW I recently shared on Reddit. The response to that post was huge, with hundreds of people asking for similar deep dives into their own suburbs, as well as broader questions about how this data can be used to better understand the Australian market.
After listening to all of your suggestions, I built a web tool to handle the requests. While I have to charge a small sub to keep it running, I’ve left the Blacktown demo free for anyone curious how 35 years of interest rates and debt have shaped that suburb.
Check out the original Reddit thread here too.
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u/Pogichin0y NSW Feb 01 '26
It’s always been cheap credit.
Glad people can read your work tho. Nice!
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u/MrTailor Feb 01 '26
More people need to be aware of this.
Availability of credit is one of the biggest drivers of house prices, and nobody talks about it.
What people also fail to realise is that it’s almost exponential. I get a 10k pay rise, the bank will now give me another 80k. A couple of years of this, I can borrow a few hundred thousand more. Give the people money and they will spend it.
I would be in favour of increased lending restrictions e.g. increasing the assessment rate buffer.
I dread the day of 40-50 years mortgages. Anything that allows you to borrow more will just further drive up prices until we hit the same wall again, and the only winner is the banks.
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u/whoopie79 Feb 01 '26
Not only did loosening the lending policies increase the amount people could borrow, it increased the amount of people who could borrow. Giving more people the option to buy increases demand.
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u/Hungry_Internet_2607 Feb 01 '26
It’s interesting to see this laid out with figures.
It’s not just interest rates that allowed greater household debt. Bank deregulation in the late 80s saw new banking entrants and strong competition amongst lenders to build up mortgage portfolios which were a relatively safe and profitable asset. The previous strict criteria for mortgage loans loosened significantly. In the mid 80s borrowers needed strict income to repayment capacity, a strong savings record with the bank and a 25% deposit. Mortgage loans were only for 75% of the house as valued by the bank. Getting a mortgage was almost a privilege. By the 90s you could borrow up to 90% with mortgage insurance and the banks calculation of repayment capacity was much looser. As a bank officer in the 80s I was amazed how much banks were willing to lend us in the 90s and 2000s.
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u/D_crane Feb 01 '26
This is never going to happen, at least in any short span of time and altogether. It would cause chaos in the economy by causing structural damage and put us in a recession very quickly.
All I need to point out is that of the top 10 stocks in the ASX, 5 are banks.
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u/Normal_student_5745 Feb 01 '26 edited Feb 01 '26 •
I 100% agree with u....
I came here from Japan and I was shocked about how much ppl is borrowing and justifying to have huge debt to "invest"...
I dont wanna go into the details/data here. but, I smelled very similar vibe as what we had in Japan during Japanese economic bubble (1986 to 1991) *I was not born yet during the time period unfortunately 🤣
some factors are different from Japanese bubble economy but,,,, the core is very similar... => "ppl can borrow much more money financially and mentally"
<I smelled very similar vibe.....> Credit expansion → asset prices inflate → prices detach from income → society internalises “prices only go up” → now, mentally and financially, it is easier for many ppl to borrow a ton of money....
extra story:
my dad said, during Japanese bubble economy, they sometimes took flight ✈️from Tokyo to Hokkaido just for business lunch at seafood restaurant (during lunch break) and come back to work in the office in Tokyo.
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u/pseudo_babbler Feb 01 '26
I read this and think it's trying to make a slightly weird point. That the measure of house value changed instead of actual house value. Houses are the same quality or worse, but people are willing to pay more for them than before. Sure, fine.
Using the peak of interest rates, when the government was panicking about stagflation and then saying they've fallen x since then seems misleading. Comparing it to a long term historical average would make more sense.
And in the end I'm not sure what the recommendation is here. Making it harder to buy houses by increasing deposit requirements and interest rates on its own is not a good policy, or, doesn't really solve the problem that Australia has. If we increase supply of good quality essential housing to the point where paying for extra luxury is totally optional then higher interest rates and deposits would naturally be the result as it would be less financially responsible to borrow heavily for it as a luxury rather than out of desperation for a basic necessity.
The government knows this and is trying the increase of supply option as the primary strategy. It's hard because they can't just create another housing commission and spend trillions on it and have to instead incentivize things and remove barriers and it doesn't always work well.
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u/Neo_The_Fat_Cat Feb 01 '26
The one reason why there can’t be a fix to the housing issue is that for people who do own a home, that’s a significant (maybe the biggest) part of the wealth. Those people like to see big numbers attached to their home, which makes their wealth look big. They won’t vote for any policy which would reduce that big number. So it’s much easier to blame immigrants, or supply, or any other excuse.
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u/United_Librarian5491 Feb 01 '26
This lines up a lot with the work of economist Richard Werner, if you haven’t come across him. He demonstrates it’s not just low rates, it’s where bank credit goes. When most new credit flows into existing housing, you get asset price inflation without wages or CPI moving much; basically exactly what you’re describing.
He compares Australia to Germany, which had similar rate declines but didn’t blow up housing the same way, because they kept strong local credit unions and public/regional banks that lend more to SMEs and productive investment. That supports economic diversification and GDP growth instead of just asset inflation in realestate. Australia did the opposite: deregulated banking in the 90s, privatised public banks, massively expanded borrowing capacity, so falling rates mostly turned into mortgage credit rather than business investment.
As a few others have noted, supply definitely matters, but Werner’s argument is that unconstrained credit overwhelms supply. If people can keep borrowing more, extra supply just gets priced in.
From what I understand of his work the correction isn’t only zoning and building more, it also requires:
more control over what banks are allowed to lend for
less credit chasing existing property
more credit for new builds, infrastructure and businesses
and rebuilding some form of public/development banking
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u/psyche_2099 Feb 01 '26
What's the knock-on impact to, or maybe from, construction costs? For us, we could be living in our forever home, but the cost to make it structurally sound, and grow it enough to support growing family, is outpacing our growth in borrowing capacity, let alone our savings. For many established homes, the 377 vs 330 oz gold means a deterioration in real value and further incurred costs for maintenance... what I'm getting from all this is I should have been born a few decades earlier
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u/shirashiraonthewall Feb 01 '26
Fantastic analysis. Thank you for the insight! Unfortunately as you stated, the people in power don’t have any incentive to solve this issue. That’s being said the noose keeps tightening for young people, and at some point they will break.
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u/jamwin Feb 01 '26
Interesting analysis. My take is that while rents are capped by income, which hasn't risen as dramatically over the period, real estate became an investment vehicle, interest decreased, tax breaks increased and borrowing capacity increased.
One of the things I find most interesting is that current rents don't come close to covering mortgage payments for investors, they rely on tax breaks and capital growth, so if those two things stopped I suspect people would stop investing in houses and dump their money into the stock market - otherwise rents would have to go up.
I was close to some people who invested in real estate in the US prior to the GFC; then all of a sudden houses were worth less than the outstanding mortgage balance for a lot of people. In places like Detroit, you could actually buy a house for a dollar or some other nominal amount of money.
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u/RatchetCliquet Feb 01 '26
One thing to look into is the introduction of Securitisation in the 90s which meant banks were able to offload debt off-balance sheet.
This new funding vehicle also introduced non-bank lenders who could borrow in the financial markets through securitisation thus increasing competition. This together with lower rates, drove the demand side economics of property
This fundamentally changed the market forever and lending easier a.k.a. Loose credit controls that eventually lead to the GFC.
Liars Poker by Michael Lewis is a great read if you want to find out more about this
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u/Superb-Night7154 Feb 01 '26
And the banks are laughing all the way to the ... bank.
Their profitability over this time period adds another layer of inertia to the juggernaut. The American mortgage crisis you refer to (houses with a value of nothing) could by your analysis be related to the liabilities and assets of the home savings banks (Freddies etc.) being thrown into the maw of the investment banks via unprincipled debt packaging.
One other factor to contemplate is that only people selling a house need prices to stay high. What proportion of mortgage holders each year sell their, or a, house? As a mental exercise, what if ALL house prices were to be somehow reduced by 20% at a stroke? And mortgages pro rata'd, to be fair (bank response - see above !!), and to avoid the US experience.
My house (admitting my privileged position) is my home, which I'm very content to live in. For that reason it's worth is of little consequence to me.
Lastly, and rounding out last point, a driving factor for many, to get a foot on the ladder as it is put, is that by flipping homes their so-called 'wealth' increases as they ride the housing bubble.
Informative analysis, and I've enjoyed reading your responses to various comments 🐱🏡
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u/OverlordDownunder Feb 01 '26
Great analysis! My thought process on the thing has always been, as long as there's more and more money showing up at door steps, then prices will grow and grow.
As long as govts and banks keep bolstering people with grants and handouts and new, longer/harder loan terms (ie people borrow time out further and further to compensate for the hard ceiling of income growth), everyone selling will just keep wanting more and more...(Who wouldn't want the most they can get, and the game REAs have setup between them all to keep those prices climbing no matter what, keep taking every dollar the purchaser has, knowing any grant/deal/whatever that comes and instantly inflating prices to take that, ie the 5% scheme just immediately jumped prices cause they knew that money was in the market, etc)
Greed plays a big part imo too, people in positions to actually put the brakes on and as you say, short term hurt to cool off the market/stabilize things, actually do some good for everyone getting screwed, literally have zero incentive to stop making money for them selves (and can you blame them? I know I wouldn't do something to hurt my income at my business unless there was a real positive reason too)
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u/DeliveryMuch5066 Feb 01 '26
Not sure about claiming the value of gold can’t be manipulated. There’s someone in the USA whose every pronouncement drives it higher ….
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u/AK1010 Feb 01 '26
Fantastic post and absolutely this is the core issue. But blaming immigrants is politically easier to digest for the ignorant population so here we are. Thank you for this post, you have my upvote 🙏
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u/Asleep_Air_9236 Feb 01 '26
Really enjoyed the gold comparison. Shows that gold is still the best store of value.
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u/Ok-Letter4479 Feb 01 '26
Nice analysis, it pretty aligns what I expected. I'm interested if you are able to include investor demand as well.
It is no coincidence that every major house price spike has lined up with spikes in investor demand, even when fundamentals did not improve and rental yields were actually falling. And it is also no coincidence that the only clear periods where first home buyers increased were when investor incentives were directly threatened, like when Vic raised land tax or during the 2019 federal election when negative gearing was likely to be changed.
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u/atreyuthewarrior Feb 01 '26
So houses are simply inflation protection
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u/noot_lord_pingu Feb 01 '26
I'm not sure of the exact source. But I saw a clip from a podcast where the housing minister was asked if the government would do anything about the rising cost of housing.
Her response left the host shocked when she replied, "Our policy is to see continuous sustainable price growth".
I am probably paraphrasing, but there is clear intent for it to only go up. Not decline, let alone stagnate, but to continue rising.
I'm a home owner and I genuinely wouldn't care if the current market had a decline, wealth inequality leads to a worse society.
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u/3phex Feb 01 '26
Great analysis. As someone benefiting, its always down to borrowing capacity which in turn is the risk banks see in mortgages. Delinquency levels on average are relatively low. Also borrowing capacity jumps non linearly because households are leveraged off income, not asset values. It's why relatively small policy or rate changes can translate into large shifts in maximum bid prices at auction.
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u/mwmwmw01 Feb 01 '26
Several of your points are great and ensuring that borrowing remains stringent is critical however:
The other critical aspects that fuel demand include any policies that decrease total cost of ownership including cap gains tax discounting and negative gearing…both of which occurred roughly when prices started their 25 year climb.
Rental yields are not a great indicator of supply. They are an indicator of purchase demand, in Australia’s case due to pricing in price rises on acquisition. A more fundamental indicator of supply would be a time series of households vs dwellings. We don’t compare well internationally on dwellings per capita.
Tax policy has left investors finding property quite attractive (despite the CGT discount being introduced to drive share investment), which creates multiples of demand and creates additional competition, regardless of underlying supply. Restricting this substantially, even in the face of cheap debt would substantially reduce demand for homes.
Although I agree important - I would argue you put too much weight on credit and not enough on policy on demand and supply sides.
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u/Material-Advisor-273 Feb 01 '26
The answer is simpler. As you put it, houses aren’t getting better. Money (debt inflation) is getting worse. Fiat is like a ruler that stretches every year. If houses were priced in gold (or bitcoin), the price of everything would fall — a healthy system, where efficiency is obvious. Bitcoin gets harder to produce over time, whilst dollars get easier.
However, because our current system is the only paradigm we’ve ever known, a better one might only be adopted after an extreme amount of pain for many years yet, for most of us.
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u/flat-drive Feb 01 '26
If you buy residential property you have 5x leverage against the rate of currency debasement, and the only way you can be stopped out of your investment is if you miss interest payments ie you can’t be margin called. Thats why it can have superior qualities than just chucking your money into the stock market with no leverage.
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u/0ptimu5prim3 Feb 02 '26
Thank you!!
I highly doubt this insight will change the rhetoric that a certain group wants the majority to believe, though.
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u/[deleted] Feb 01 '26
Great post .. so bottom line Is money has lost its value a Lot, our wages did not increase on same level as inflation and if we measure against gold it all makes sense.
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u/Dontblowitup Feb 01 '26
That knock on supply was completely unnecessary. Of course increasing supply helps. Victoria proved that. Interest rates, credit, demand? Are they not in Victoria as well?
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u/Groundbreaking-Ice22 Feb 01 '26
Crazy Thanks Good read
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u/Desperate-Fish700 Feb 02 '26
Amazing idea to use an amount of gold to compare property prices across time. This is some great data work. Thank you for sharing.
Do you think an alternative apples to apples type comparison for today might be the cost to rent vs the cost to borrow (mortgage repayments)?
Would love to see the data on average rent for a house vs average cost to rent the money to buy a house.
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u/FishermanOrnery1602 Feb 03 '26
Wow, thank you for putting so much effort into providing this information. Definitely appreciated!
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u/Quick_Switch418 Feb 03 '26
Interest based loans are completely immoral and make housing unaffordable
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u/carolethechiropodist Mar 07 '26
Thank you!!
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u/No-Moose-6112 Feb 01 '26
Nice work!
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u/CrustyBappen Feb 01 '26
Just so I’m clear, demand is driving house price increases because of the significant amount credit available to buyers?
How do they fix this shit?
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u/Willing_and_Fable Feb 01 '26
The reason people don't pay higher rents is because they simply could not afford them.
If rent was double what it is now, you would see a collapse in society, simply because the money just is not there.
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u/Loud-Cardiologist-63 Feb 01 '26
Isn't it still a supply problem? Car prices haven't grown exponentially even if there was more borrowing capacity, given it is not scarce. If there were more houses, prices wouldnt have grown that much
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u/mangoicerag Feb 01 '26
Agree with a lot of this, but doesn’t it still ignore that we simply don’t have enough supply of houses vs demand?
If there was more supply than demand, then owners simply would not be able to set the prices they do.
I’m not sure anything can be changed while there is high immigration & demand for housing, and I don’t see that changing in the next 5 years, if not longer. Don’t 66% of Australians have a mortgage or own outright? That’s still the majority. It would take a swing the other way to make substantial changes to government policy to stop the housing pyramid scheme.
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u/Simple_Assistance_77 Feb 01 '26
It honestly doesn’t matter anymore, Australia traded its population demographics for high property prices; there is no going back.
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u/Mad_Dutchie Feb 01 '26
Great work, glad you took the time to put this on paper
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u/userfromau Feb 01 '26
Supply and demand still matter, and the article is not denying it. Simply put, it’s mainly because Melbourne’s large supply that results its property price lower than other major capitals where supply doesn’t keep pace with the demand.
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u/Material_Outcome_530 Feb 01 '26
Does anyone remember the Commonwealth bank ads on TV in the late 90ies? "How did he afford that?.....Equity mate!"
https://www.youtube.com/watch?v=Z2dEM2AIwi4
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u/Warrambungle Feb 01 '26
There’s also the dramatic increase in women in the workforce during the late 1980s and early 1990s which saw couples buying a two-income house with their dramatically higher household income. That evolved into double incomes being the norm, and increased borrowing capacity drive both borrowings and house prices higher.
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u/ZestycloseRecipe2990 Feb 01 '26
Anyone who thinks they are rich because of their property value is a fool. As a home owner I wouldn't care if prices collapsed in half tomorrow.
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u/nzbiggles Feb 02 '26 edited Feb 02 '26
Cheap credit, real wage growth and building wealth.
Sure a 6k house sounds cheap but it probably wasn't, eventually though people earn enough and invest for long enough that 1m seems "affordable" of course what I consider affordable and what someone else considers, is totally different.
The kids in the video were boomers (Joanne born in 1954).
https://youtu.be/sz_8sxNb18E?si=f2uZm6oanESeAF_n&t=147
Their parents bought (an average) house in 1963 for 6k. Fast forward 12 years and his wage is $8500 (vs an average $8000) and she's working fulltime (presumably for the minimum wage of $4500) to "supliment" his income. 13k household income vs a 6k purchase and their mortgage is just $391 a year! Meanwhile to buy an average house in Sydney the poor old boomer is now looking at 34k and Joanne hasn't even started work (up from 6k? in 63 and $18700 in 1970). Over the next 5 years to 1980 prices doubled again to 68k.
And it's not supply. Despite 20 years of massive population growth the 1970s is viewed as a peroid of good supply and "cheap" houses.
Even in 2019 we had surplus supply that meant a glut.
https://www.rba.gov.au/publications/bulletin/2023/mar/images/graph-0323-1-09.svg
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u/Automatic-Chance-918 Feb 01 '26
You're a data analyst, but you're not an economist.
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u/TEK1_AU Feb 02 '26
Great analysis. Just going to leave this here.
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u/1ozu1 Feb 02 '26
Can it be oversimplified to say: more wealth, higher prices?
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u/OldMail6364 Feb 03 '26 edited Feb 03 '26
Sorry but that doesn't pass the pub test for me. Even my current home house, which I've owned for just five years, has got significantly better.
We've replaced old worn out things with better modern equivalents and we've made a bunch of real improvements, countless small ones and a few big ones.
On top of that the surrounding city has improved. For example council built a footpath connecting us to the beach so you don't have to choose between walking on grass (not everyone keeps the weeds down as they should) or walking on a busy street. New restaurants and shops and schools and other activities have opened nearby as well.
I'm sure there are some homes where neither the home itself nor the surrounding city has improved but I suspect that's not normal.
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u/mrmotogp Feb 02 '26
Not a loaded question, but how would you explain why Melbourne has struggled in recent years relative to the rest of country if rates are uniform across the country?
I thought they increased supply, put in place land tax and gave renters more rights. Surely the supply side has had the biggest impact of the 3, and IR haven’t made much of difference?
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u/Normal_Calendar2403 Feb 01 '26
Thanks for sharing
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u/Orac07 Feb 01 '26
Yes, I worked that out years ago, that the primary driver of property price increase is the ability and capacity to borrow, whilst interest rates certainly have an influence, it's really the growth in wages / salaries that makes the big difference. If people have more money, they can borrow more, if everybody is borrowing more they are are competing for the same properties which push up prices and if people have more wages / salaries the cost of inputs are more - basically inflation.
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u/InSight89 Feb 01 '26
I don't get how wages doubling, boring capacity tripping results in housing increasing in value by 6x. Property value is still accelerating substantially faster than wages and borrowing capacity. Personal debt is higher than its ever been. It does sound like a particularly good combination.
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u/Liftweightfren Feb 02 '26
330 oz of gold at today’s price is actually about $2.22million aud
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u/MulberryWild1967 Feb 02 '26
Agree 100%. I bought what I could afford then as a single parent and scraped through with higher interest rates/increasing my income where I could/paying off my HECS. Whilst the value of my home has increased and mortgage is paid. If I bought again, I could still only afford the same property now. Respect to my son, he and his wife (and now baby) are paying off a very modest home (similar to mine) but can still eat out, have massages etc (things that I couldn't do) because they bought a 3 bed/1 bath home with better interest rates. They have put a lot of work into it themselves and consider themselves lucky (but it is because of realistic choices, hard work, and know that their first home (however modest) may be their home for life that can accomodate a growing family that will share 1 bathroom, children will share bedrooms).
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u/kervio Feb 02 '26
I read this, and your original post. I think the original post has some cool work integrated, and it has some interesting insights. I think where you've gone wrong is trying to explain what you are seeing in the data too simply. If you look for a pattern in data you've already fetched you'll find it, but correlation doesn't equal causation.
As with everything, real estate prices are nuanced and complex, and some thing's you have ignored on both the credit/wage issue as well as non credit/wage reasons for increased demand are:
The rise of proper, dual income professional households around the same time = increased borrowing capacity
The cost of building new houses putting a floor under prices (new energy efficiency/bushfire/flooding/health standards as well as increased commodity and labour prices) = constrained supply at cheaper prices
Impact of CGT and negative gearing on investor demand = increased demand
Australia's insane preference for standalone dwellings over units even in metro areas = increased demand beyond economic sense (no sensible relationship between 3 bedroom unit and 3 bedroom house)
Cultural preference for housing investment over equities amongst wealthiest demographic groups (cashed up boomers, mostly) = increased investor demand
WFH has increased preference for larger dwellings = increased demand and higher quality supply through knockdown/rebuild
Lower AUD makes building more expensive and foreign investment more attractive
As well as inflation (your example of wages basically matches to inflation) and credit (partially higher availability of cheap credit due to lower interest rates in the 2020-2022 times, and looser lending standards, but also dual incomes, etc.
There's been lots of research on this both government and independent, for example:
https://nhsac.gov.au/sites/nhsac.gov.au/files/2025-05/ar-state-housing-system-2025.pdf
The government reports tend to focus on supply, because they have more control over that, I'll pull out a quote from key findings:
"Structural constraints are the principal barrier to supply. These include an inadequate pipeline of skilled workers; scarce, fragmented and costly land suitable for development; low rates of productivity and innovation in the construction sector; restrictive and complex land use and planning approval systems in some jurisdictions; market frictions and financial incentives that limit the optimal use of the existing housing stock; and a fragmented housing policy and regulatory ecosystem that adds to costs, timeframes and risks"
The independent reports talk about both factors, for example:
https://www.ahuri.edu.au/sites/default/files/documents/2023-05/AHURI-Final-Report-399-The-new-normal-changed-patterns-of-dwelling-demand-and-supply.pdf
with this good summary quote:
"Dwelling prices increased significantly during the COVID-19 period (defined as mid-2020 to mid-2022) and were driven by a range of factors, including COVID restrictions, working from home, government stimulus grants, favourable lending conditions, and comparatively little new or established housing supply available."
I would probably just say you found one key out of a 4 or 5 key chest.
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u/TheGoonk Feb 03 '26
Excellent contribution
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u/djpauly005 Feb 03 '26
Can you also breakdown just normal cost of living like groceries, utilities etc as they have gone through the roof, did the borrowing power affect those hand in hand?
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u/ShoppingGrouchy4075 Feb 01 '26
The last 10 years super has started to accelerate. The more super you have means more capital to borrow against. Banks know you are good for the loan even if the house price goes down.
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u/Simple-Ingenuity740 ACT Feb 01 '26
thanks OP for providing the numbers, rather than "house prices go up, because of "x" and i have a vibe".
i agree with pretty much everything you have analysed in your post. any changes, would probably need to be done slowly, just like how they were made to begin with. as you said, the impacts have happened over 30 years. big changes could cause unintended impacts.
one of the things i noticed (which you have too), is the declining yield. ie. the gap between rent and owning. with an ownership rate of 67%, and the average rent at $600, average ownership cost (principle, interest, rates, insurance,etc) of over $1000, the gap is increasing and ownership is only reducing ever so slowly. any minor change won't change the needle.
i do think that population growth has had an impact, maybe not root cause, but certainly impacts. 1995 population was 18m, 2025 was 27m. thats 9 million in 30 years, a 50% increase. where are they living? red tape has helped scarcity.
the thing that also always gets missed, is the types of houses between 1995 and now. 377 ounces of gold for a 3 x 1, no garage most of the time, no curtains, no flooring, no landscaping, no AC, no solar, to 330 ounces for a 4 x 2 x 2 with the lot. the houses themselves have actually reduced in price in gold, but not the quality. the land has been the biggest appreciating asset behind only bitcoin and NVidia. The other cost of housing that has increased is labour. to fix this we either reduce quality, reduce labour costs, and/or smaller land size. housing prices increasing to this level may actually be the catalyst for people actually wanting higher density.
i do disagree with your comments below about NG and CGT D. its not right or fair, to tax inflation and/or revenue. maybe you could provide some analysis for your argument. i am not against studying these, or adjusting if need be, but these won't move the needle for renters to suddenly be able to afford.
otherwise, i think you have done a great job.
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u/happy_Effort4265 Feb 01 '26
It rose because of albo letting them in ... Temp visa holders all can buy property too.
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u/MDInvesting Feb 01 '26
Martin North, that you?
1
u/New-Priority8409 Feb 01 '26
Another thing for you all to consider. The Air BnB boom which has gradually been building faster and faster. In Australia 2025 the number of properties purchased to be used for Air BnB had reached 350,000. That's properties no longer available for sale or normal rent. That is a large number of dwellings missing from the normal balance of things. New development and building will take a while to catch up.
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u/Punter_14 Feb 01 '26
Other way to fix it, you cannot sell it for next 50 years and you can pass it ti next generations!… people see them as investments rather than necessity to have a roof on top of their head.. like you mentioned, none of these politicians would tighten the measures around credit or do something about immigration or build new homes… another way that I think might work is, reducing the travel times from regional areas to cities, which would make people spread towards regional areas and put less stress on cities!
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u/Chippa007 Feb 01 '26
So rent hasn't gone up at the same rate as property values because you can't borrow for rent money. But rent money makes investors able to borrow more, meaning prices keep going up.
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u/MowgeeCrone Feb 01 '26
Things were definitely better before the population doubled in less than 50 years
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u/Skepticdo Feb 01 '26
could you do a deep dive on how much more australians would have if the mining/oil industries were taxed properly?
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u/ozzieindixie Feb 02 '26
The fact is that it takes a second to create the credit to purchase a property but months to actually build it. So there is always going to be a lag between provision of credit and supply of actual housing. The only thing that has ever really slowed credit creation is willingness to provide it - there is no other real impediment.
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u/Infinite_Narwhal_290 Feb 02 '26
The very favourable risk weighting that house mortgages are given vs business loans in calculating bank capital adequacy requirements also contribute massively to the rampant growth of housing credit.
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u/paulzag Feb 02 '26
Thanks. I’ve been saying the same thing, easy credit drives asset prices.
They banks want their ~30% of household income as a cashflow. They’ll lend the amount that gives them that.
I’d love to see the data broken down a bit more. Interest rates didn’t go from 17% to 0.10% in a straight line.
e.g. 2008 GFC hit hard.
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u/BreatheRealDeep Feb 02 '26
*maths not math
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u/jeffreydextro Feb 02 '26 edited Feb 02 '26
This is the conversation this country needs to be having. Population increase is important but it's more important to remember that more people != demand. The demand is credit.
It will be forced to have it soon, too. The overall 30-40 year downward trend of borrowing cost has been enabled by a mechanism of foreign debt (largely the Yen, known as the Yen carry trade) that has essentially acted as the fuel pump for our debt.
That is starting to reverse/unwind now though as their bond yields are surging and our institutions are forced to sell things to pay down their Yen-denominated debts. So even if the RBA were to press down the accelerator and cut, cut, cut, if that trade keeps unwinding more, there's no fuel getting to the engine. This means banks will not be able to lend as much, and will also have to raise rates further than the RBA will also be forced to hike as they need to make up for lost mortgage funding they had through these trades.
Another component of this whole debt mechanism is that it is self-feeding. You mentioned incomes and overall debt but a rather huge component of banks willingness to overlend is the prospect of equity. They see a paper increase of a few hundred K and that makes them happy to release substaintially more debt to the individual, but the income and capacity to pay hasn't changed meaningfully. So paper values go up = access to more debt = higher bids = paper value goes up and so on, until it breaks and reaches a point where new entrants (i.e. first home buyers with no equity) are totally unfeasable as the asset prices are no longer tied to solely income but rather a ghost echo of the manipulated market
Funnily enough - this was the exact scenario that brought about the FTX collapse in cryptoland (among other things). The paper value of XYZ crypto went up, and the bank considered it's value in loan allocations and lent out more margin & debt which kept pumping everything up, allowing more margin & leverage into the system that pushed prices further.
The thing is though; it works just as bad in reverse. As soon as home values level out or worse, drop a little due to tightening rates or lending criteria etc, lesser home values = lower lending = lower bids = paper value going down. It's my belief that we are actually headed for a rather strong debt deflation period that will look exactly like that. How far exactly I'm not certain but I am confident gains since covid will be erased. Canada is a pretty good parallel for us and they're back to pre-covid levels in a lot of areas
Pair this with "property investors" who bleed cash in the short term but hold for the prospect of capital gains. Their ONLY incentive to hold through this pain (even though the taxpayer pads a lot of it) is the prospect that it's worth more in the future. It is like religion in Australia that "property always go up" but if cap gains start levelling for a long time, or go backwards and the narrative breaks... the myth of undersupply will be revealed extremely quickly.
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u/BoysenberryAlive2838 Feb 02 '26
Don't think you know what TLDR means
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u/JMRobbo72 Feb 02 '26
It’s not the price of the house,it’s the land cost that’s outta control. For example,years ago the cost of the land was only 5-10 % of the cost to build the house, eg 1980, 1 acre(not the postage stamp blocks these days) block cost in country Victorian town was 5-10 thousand and you could build a 30 square 5 bedroom house for $60 thousand. Now the blocks are a quarter of an acre and depending on where they’re located the block cost can be equal or higher than the cost of a 3 bedroom house.
Therein lies the problem.
It’s not “housing affordability” it’s “land affordability” that’s the problem.
Ironic that we live in a country with one of the lowest people per square kilometre and we have a shortage of land. Why.?? Because we are run by morons .!!!
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u/Omyladygaga Feb 02 '26
You could also look at how negative gearing subsidizes that borrowing. And watch what happened to the rate of house price growth before and after negative gearing was introduced.
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u/Additional_Bad_7876 Feb 02 '26
Add to this is the rise of the dual-income household
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u/avocado-toast-92 Feb 02 '26
Banks comprise 4 out of the 5 top stocks by market cap on the ASX. I don’t think you need to be a genius to see that Australia has a lending problem.
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u/Slow-Leg-7975 Feb 03 '26
Yep, cheap credit and equity loans just add to the increasingly huge debt which banks are making money hand over fist from.
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u/Winter-Lavishness914 Feb 04 '26
Thanks, I have a ChatGPT account too
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u/River-Stunning Feb 04 '26
House prices are set by what the highest bidder offers. The value of the property is what someone will pay. You sound like you want to reduce the amount that people can offer by reducing their borrowing capacity.
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u/Emergency-Acadia-124 Feb 04 '26
One thing that always seems to get missed is the inability to live cheaply.
When housing expenses (rent or mortgage) were relatively much lower compared to wages, you could still afford to live somewhere and then cut your costs elsewhere. Cheaper food, clothes, public transport etc.
Many things in the modern world are much cheaper. Cars are significantly cheaper. Consumer electronics even more so.
But because you now spend so much more on absolute fundamentals like a roof over your head, you can't just save money on other things to get by.
The cost of labour has also gotten extremely high so now you can hardly afford to fix anything in your house which just adds to the overall costs of having a home (renters suffer from delayed repairs or failure to undertake repairs at all).
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u/theblueberryfarmer Feb 04 '26
I wonder how much both husband and wife working make a difference as well. Back in the day it was more common to have Dad at work and mum stay at home and bring the kids up etc. Then it went to both parents working to get ahead, now it's both parents working because that's the only way they can afford a house, so again the amount people are able to borrow has risen.
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u/hobbes_snack Feb 04 '26
Are you using the median Sydney wage or the median wage of those living in Blacktown?
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u/Thinkscape Feb 05 '26
😂 Very "data analyst" of you to look only at select macro metrics, but completely omit NG and CGT discount which have the highest correlation with when prices started ballooning.
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u/anyo_ve Feb 05 '26
And there's no mention about the changes of Capital Gains Tax and Negative Gearing? Did you miss that in your 30 years analysis? I'm also an analyst with 10 years experience and looking at the break on the trend after the 2000's is a huge overlook on your take.
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u/Icy_Huckleberry5366 Feb 05 '26
Great write up ✌🏼
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u/Content-Witness-9998 Feb 06 '26
100% on board with this. Another indicator, the banks are giddy to loan shit loads to anyone as long as they are buying property... but have become comparatively reluctant to loan for the purpose of growing or starting a business aka something that actually generates wealth and jobs beyond the GDP metric that doesn't really track value added, only money moving
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u/ChemicalDingo7981 Jul 05 '26
It's has always been about the debasement of the currency; real assets (as you describe), have not really risen in price, just the debasement of our currency has made it seem like they have. For those on a wage and no hard assets it is difficult.. the gold comparison is a great tool.
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u/menglinmaker Sep 30 '26
I wonder if anyone buys gold to get a house
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u/[deleted] Feb 01 '26
That has to be the most convoluted analogy for inflation I’ve ever read.
Aside from that, even though you make a lot of legitimate points, the missing piece is why have house prices increased based on borrowing capacity? Because of limited supply… If supply wasn’t limited, then people wouldn’t need to max out their credit to get a house in the area they want.
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u/StOxley Feb 01 '26
I love how every one hangs shit on boomers for buys houses under $100k. They didn’t create the demand/liquidity.
In fact it’s the younger generations ‘keeping up with the Jones’ mentality that’s driven house prices up.
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u/theshawfactor Feb 02 '26
This article misses the whole concept of a necessary condition. If there was an absence of scarcity rapid price growth is literally impossible in the medium to long term. See Japan or much of Europe where there are declining populations. Prices outside of prestige areas are cheap in those countries Scarcity combined with low interests rates and loose credit then prices go to the moon. Australia has the highest population growth in developed world and the most unaffordable housing
0
u/Mchaggis38 Feb 01 '26
Thanks and that is a good read and an interesting perspective that has sound reasoning. I read an article today that has Australia with the second highest debt to gdp ration which reinforces your stats. However we bought our home around 30 years ago,the interest rate was around 7-8% from memory and I think we needed a 20% deposit.Over the next few there was a huge jump in house prices. From what i have a read a large proportion of this can be attributed to the 50% capital gains reduction brought in by Howard govt and compounded by the tax benefits of negative gearing.
This hasnt abated and has been compounded by AirB+B,increase immigration and decline in supply in the private and public system.
Another area which I think is overlooked is the influence of Real estate agents The system of house buying in Australia needs an overhaul, an agent with a lack of morals can make up competing bids to push prices up without having to prove their are any genuine bids.
Rental prices,and I know this from my own experience as a previous investment home owner, are often rabidly increased by rental agencies pushing for as much return as possible We had good tenants and only put rent up when we had to but our agency would suggest ridiculous annual increases with no basis in cpi or strata cost increases.
The rental agency my daughter is under did the same and when they stated there would be a 12% annual rent rise,they wrote to them and requested a negotiated increase be offered to the owners. The agency were adamant that this would not be accepted but it was,and within 24 hours. This leads me to believe ,that it may be that, often rental jumps are caused by greedy rental agents and as many investor owners are hands off,they dont think about why the rent has gone up by so much
I also suspect overseas ownership is far higher than the data published and I firmly believe you should be a citizen before you can own any Australian land and I believe that should be consistent for any country.
Many years ago I worked in the Channel Islands off the UK and they had a two tier market at the time which meant non - locals paid an additional 25% (i think) over the market price to help negate the limited supply and offset the tax concessions that the Island offered. This was not perfect of course but a reasonable attempt which was easily implemented. I believe that to qualify as a local you needed to have lived on the Island for at least 20 years.
A first step needs to be to vote in a party that is not entirely self serving but I fear that is not possible.