We need to talk about Australia’s housing market.
Any Australian, who has not been asleep or dead these past 5 years (or 15 years in the Sydney market), will be conscious of the extraordinary growth in house prices in recent times.
Yet a brief overview of some key data points is in order here to contextualise the scale of this jump in value.
Australian’s housing price data for 2025 confirmed, for the first time, that six of Australia’s eight capital cities boast a median house price in excess of a million dollars.
The Sydney housing market, with a median value of $1,759,909, continues to lead the nation although, as the ABC reports, the city saw only a “modest rise” in house prices of 6.4% in 2025. In dollar amounts, this meant that the median Sydney home added ‘only’ just over $100 000 to its value in 2025.
Lest any reader think this normal, the Sydney market is on track (if it hasn’t become so already) to becoming the world’s most expensive housing market on a median house price to median household income ratio.
Indeed, the Demographia International Housing Affordability report in 2025 found that five Australian cities rank in the fifteen most unaffordable housing markets world-wide. Collectively the Australian housing price to household income ratio was 9.7, placing us behind Hong Kong’s ratio of 14.4 but ahead of nations like the United States (4.8), the United Kingdom (5.6), Canada (5.4), and New Zealand (7.7).
But the sheer insanity of Australia’s house prices is that the 2025 report (which was based on data from the third quartile of 2024) is already too dated to give an accurate representation of the market. Perth, which became the most recent addition to the million-dollar median house price club, registering a median rise of 18.4% across the course of 2025.
The effect of these escalating values has been to price out an entire generation from the property market in the space of a couple of years. And this, to be clear, represents both an economic and moral crisis afflicting Australia’s young people and families.
The economic crisis should be clear enough. Australia, now more than ever, possesses a two-speed economy where the predominate determiner of poverty or wealth is when (or if) one was able to enter the property market.
The importance of property for building wealth coupled with the cost of a mortgage (the average new owner-occupier home loan is almost $700 000) has driven the Australian household debt-to-gdp ratio to the second highest in OECD countries.
The strong, or frankly ridiculous, returns offered by the housing market along with a favourable tax regime bias investment towards property. Mortgages represent 64% of the loans held by Australia’s big four banks while the sum of all Australian mortgages total of 2.3 trillion dollars (larger than the entirety of Australia’s GDP[i]).
A partial consequence of this one-eyed investment is a lack of complexity in the Australian economy which has become almost entirely reliant on just a handful of industries. By Harvard University’s measure of economic complexity, Australia’s economy is one of the world’s least complex ranked just 105th out of 145 nations[ii].
More and more of our economic eggs are being placed in the housing basket. I think it quite possible that Australia has placed itself in real economic danger. And at least one of the necessary precursors to a bubble has existed for some time; that being the commonly held belief that prices will continue to rise without fail.
There is also, and perhaps even more importantly, a moral dimension to run-away house prices. The absurd price-to-income ratio of Australia’s housing (9.7) places economic burdens upon societies most vulnerable and least wealthy groups including young workers and families upon who the future of Australia’s economy and society rests.
Indeed, exorbitant house prices have the effect of creating vulnerable populations among young people and families who, in a more functional economy, shoulder a significant share of social and economic responsibility in the care for the very young and old. This is all the more true as rental markets have seen their own explosion in prices and thus offer no respite from the housing market’s woes.
While I am sceptical of those who link the declining birthrate solely to economic factors, it is doubtlessly also true that Australia’s housing market has made it exponentially more difficult to raise children. The Catholic Church, in particular, which preaches generosity in having children and against artificial forms of birth control, ought to be alarmed at an economic landscape that positions large families (read more than two children) as an upper-middle class privilege.
The Australian housing market, which creates winners and losers in extremis, can no longer be said to serve the common good of society. It is in dire need of wide-ranging, structural reform before something breaks either socially or economically. Or, if what I suspect is true and Australia’s housing problem must inevitably end in tears, then what is needed is a sort of pre-emptive autopsy that recognises what has gone so badly wrong.
[i] In contrast US and UK mortgage debt is less than half of those nations’ GDP
[ii] This places us in such company as such economic stalwarts as Panama (103), Botswana (104), Côte d’Ivoire (106), and Ghana (107).
