Why is Australia's property market so out of control?

With the exceptional growth in the property market over the last year, more and more buyers are finding themselves squeezed out as housing affordability in Australia increasingly becomes an issue. But what are the cause of soaring house prices? And what are the solutions?

Our experts will explain the state of the Australian housing market, what has caused increases in housing prices and how it compares to wage growth.

Note: Information correct as of January 2022, so doesn't reflect recent interest rate changes.

0:23 Australia’s $9.2T housing market
1:07 What affects house prices
3:29 How does a mortgage work
3:47 Impact of interest rates on borrowing power
6:09 Australia’s median house price growth over 12 months
7:10 Challenges getting into the property market
8:13 5% Deposit Home Guarantee Schemes
8:50 Government’s role in housing affordability
10:52 Increasing housing supply with new builds
12:08 Modular and pre-fabricated container homes
12:56 Tips for first home buyers

[PremSteve-ygde]

Because so many people overpaid for homes even while loan rates were low, I believe there will be a housing catastrophe because these people are in debt. If housing costs continue to drop and, for whatever reason, they can no longer afford the property and it goes into foreclosure, they have no equity since, even if they try to sell, they will not make any money. I believe that many individuals will experience this, especially given the impending mass layoffs and rapidly rising living expenses.

[johncahalan]

Nice explanation of supply and demand 👌.
What is life without money ? I think it's irrelevant. When you live, always try to invest for future moments like this to ensure profits and growth.

[mx]

The path we traveled to get here over the last 25 years,
- introduced negative gearing
- deregulated bank lending practices(easy money)
- foreign ownership up to 60% of developments
- increased migration
- government handouts to buy homes
- painfully slow council planner's
- and now material price increases
all poorly managed by government.

[ReidCoffman]

I sold a couple of homes in the canberra area for pretty good cash and I'm thinking to just leave it in stocks while waiting for a house crash to happen and as well avoid inflation, but is this really a good time to buy stocks? I hear it's a madhouse right now and I still hear folks are raking in huge 6figure profits by the weeks and I'd love to know how.

[dsinghr]

I have no interest in buying home, but this rental market won’t let me. It’s crazy difficult living in Australia at the moment

[krissyk]

Its very unfair. Baby Boomers were able to buy a house 30 yrs ago for $100, 000 - and now that house is worth $2 million. But wages have not increased anywhere near that rate. Its very unfair for younger people who have to pay these high prices.

[craigxxx]

Yes, yes, yes bubble started in 2003, house prices doubled overnight, why? It actually occurred in a few countries, this supply and demand bs is meaningless...could it be govt allowing people from anywhere in the world to buy houses and speculate like a stock market also caused this? Anything for stamp duty taxes?

[montezdiego]

Nice explanation of supply and demand.
Unfortunately it is irrelevant for has the current boom where government property welfare and money printing inflated the market while the population was stagnent (or shrinking in Melbourne). These tax payer funded property market stimuli are also a major cause of the current inflation issue.

[tanweerahmed]

Similar situation in Canada, how shameful is that Canada and Australia are one of the largest countries in the world by size and still have housing issues

[leonardvillani]

Pricing most young people out of basic necessities (food, water, and affordable shelter) and by extension having children of their own always leads to horrible outcomes for society.

[MrRez]

This was awful reporting on a crisis that is way worse than reported. A House was never meant to be an asset it was always meant to be a place to live. Every government intervention so far has done nothing else but increase house prices. They way this will be fixed is get rid of all investor related tax breaks and force them out of buying up homes and turn them into ROI’s. I once told an investor that they are effectively stealing a home from the pool of properties and turning it into an ROI they didn’t have an answer to that one.

[errolfeistl]

There are more than enough homes in Australia (there are 1, 000, 000 empty homes currently), the problem is the tax incentives designed to help the rich while the "support programs" "designed" to help first home buyers simply push prices up even further. Its all fun and games now, but the Australian economy has transformed into selling rocks to China and selling houses to each other. While this is great when Chinese demand for resources is high and global interest rates have been dropping (allowing $3tn of "wealth" to be created in 12 months), in the even Chinese demand drops (EG their population is now decreasing while they have 80 million extra empty homes) and global interest rates rise, the Australian economy could be in for some difficult years.

Our housing market is now more overvauled than the japanese market in 1989, which then suffered price drops of over 40% in the following decade and still haven't fully recovered.

The major problem.... Government policies that raise housing prices is popular and wins you government, even if its the wrong long term decision for the country as a whole.

[shaunharrison]

Yet everytime the government steps in to "help" it just drives the property prices up. Increase supply of you want lower prices.

[wingedviking]

Surprised no-one touched on this:
Investment properties should not be allowed. It should either be illegal to own more than one property or, the less direct alternative is to have laws that punish having investment properties and make it so unprofitable that no-one will do it (same outcome either way).
Unfortunately, the opposite is what has happened; there have been laws made to make investment properties very lucrative because, surprise, surprise, most of the people responsible for passing those laws own one or more investment properties. A prime example of corruption.

[trinitiusw]

The Labor gov should start imposing a temporary home hoarder’s tax for people who own more than 3 homes. Starting from an extra 20% land tax for every extra house rising to 100%. With the rising interest rates that should help to alleviate a little of the current supply problem

[sinkc]

This video tells the fact but not even gives a scratch on surface of the problem. They talk about economics, blah blah blah, supply and demand, etc, to make you believe there is a theory behind. However, there is none. It is just basic, GREED! what OZ misses now is a policy to oversee the rental market, not just the price but condition of rental property quality. Secondly, what really broken is the taxation let the wealth scheming sacred land resources and multiple homeownership. Why there is no special stamp duty for the 2nd investment property in this country to limit the competition to those who haven't owned a house. Think deeper guys and gals.

POLICY POLICY POLICY!

[gremics-gallery]

REMEMBER - we have a real estate site giving us a point of view. So keep questioning what's been shown here. Possible biasing in what's being presented.

[canwelook]

Remove or reduce negative gearing and prices will drop immediately.

[glennfolau]

It is exactly the same in NZ, for years property has been over valued, and many have suffered as a result. In my parents generation, 60's- 70's, the home ownership rate was at 70-75 per cent. In my generation, 80's - 90's to early 2000's, home ownership was achievable even for those on a modest or moderate income. Currently home ownership is beyond the reach of many. Property prices have risen, but wages have not increased in line with house prices. To give you an example, I purchased a 1930's two bedroom stucco home in an average, but well established suburb in Auckland, for $90, 000.00 NZ, in 1990. I eventually on sold the property to move up the ladder. The price represented just over three times my yearly salary. The bank were undecided as to whether they would give me the mortgage, they agreed fortunately. That same house sold in 2018 for $810, 000.00 NZ. My wages have definitely not increased at the same rate as the housing market, and I probably would struggle to qualify for a mortgage at todays prices, if I were starting out. Then we had this diabolical situation, where investors/speculators would buy property and on sell them at a profit, even before the original purchased had settled. This created a buying frenzy for those who could afford it, and it was like there were those who used the property market as a casino. Sadly, successive governments allowed this practice to continue, in fact encouraged it. Thankfully, governments have taken steps to reign in that behaviour. I also believe that if property prices decrease or stabalise, then we should celebrate it, as this may just allow those who are locked out of the property market an opportunity to purchase.

[peaceleader]

I am an Asian refugee.. I never understand about assets and liabilities..
At church ⛪ time every Sunday I hate it so much and sitting outside near a property boundary of an old man rose 🌹 garden near riverside drive.. and one day on Sunday, the Oldman somehow talked to me and ask me to buy his block and explain to me about houses and cars and what is the difference when you buy them.. and yeah I have a nice flash 📸 Holden at that time and this is almost thirty years ago... and naturally I was thinking yeah right old dude..😅
And later in life my memory and reality kinda clicked and I remember his advice and yeah I bought a house 🏡 in the 90th and bought another one later when the mortgage of the first home relived.. hmmmm.. thanks you old man.. I may not bought your luxurious huge block of land near the Swan River but I remember you and took your advice.. 🙂.. hmmmm