In Australia, the dream of homeownership is slipping further out of reach for many. As house prices soar, nearly half the nation finds itself locked out of the property market. Now Alan Kohler – one of the country’s most trusted voices in finance – addresses what has become one of our most pressing social challenges in his new book, The Great Divide: Australia's Housing Mess and How to Fix It. We spoke to Alan and, with trademark rigour and clarity, he untangled the web of tax incentives, population pressures, and government policies fueling the crisis and why, despite the public outcry, solutions remain frustratingly out of reach.
David Halliday: We’re dealing with an ongoing housing crisis in Australia where house prices have inflated to the point where nearly half the country has been locked out of the property market. For those people who own their own homes and perhaps don’t yet realize the scale of the housing crisis issue in Australia, can you give us a sense of the stakes?
Alan Kohler: We’re in a situation where the average family, on average wages, can’t afford the average house. And there’s only a small proportion of houses that they can afford. There are many things that flow from that. The number one thing is that young families are tending to overcommit. So in order to get the family home that they need, they have to borrow quite a lot. Therefore, a big proportion of their income has to go on servicing the mortgage so that their lifestyle is very, very crimped. There’s a very big transfer of wealth going on from baby boomers to millennials, what’s commonly called ‘the bank of mum and dad’. So it’s very difficult, if not impossible, for most young families to buy a house unless they’ve got families that can help them, and that means it’s worsening inequality because a lot of people obviously don’t have parents who can help.
This is the foundation of the cost-of-living crisis that everyone talks about. The focus tends to be on inflation, consumer prices, supermarkets and so on. But really, the basis of the cost-of-living problem is housing.
In the book, you pinpoint the year 2000 as sort of turning point where Australia saw this great uncoupling of wage growth and house price growth. What was significant about that moment?
There were four things that happened around the year 2000. The first one