The Australian Housing Puzzle: A Homeownership Nation Where Prices Never Fall
Prof. Piyush Tiwari
Professor of Property at the Faculty of Architecture, Building and Planning, University of Melbourne, Australia
Piyush Tiwari is Professor of Property at the Faculty of Architecture, Building and Planning, University of Melbourne, Australia. He is Editor-in-Chief of the Journal of Property Research and Trustee of the Property Research Trust. He previously served as Director of Policy at the Infrastructure Development Finance Company (IDFC) in India, where he worked with national and state governments to formulate policies for the private financing of urban infrastructure. He has published extensively on issues related to real estate and infrastructure and has served as President of the Asian Real Estate Society in 2016 and 2025. His recent research addresses housing affordability, the role of housing in household well-being, Build-to-Rent, land-based financing mechanisms, and policies related to net zero cities. His work has informed policy internationally and has been referenced by the OECD, RICS, ADBI and other institutions. He is a co-author of UN-Habitat’s World Cities Report 2026: Global Housing Crisis — Pathways to Action.
The Australian Housing Puzzle:
A Homeownership Nation Where Prices Never Fall
Introduction
For the past twenty-five years, Australian house prices have maintained an almost uninterrupted upward trajectory, surviving the 2008 global financial crisis and the COVID-19 pandemic without a sustained correction. As younger generations find home ownership increasingly out of reach, an intergenerational wealth divide is widening, while those who turn to renting instead face a rental market whose supply keeps tightening and whose tenancies offer little security. In this dialogue, we speak with Professor Piyush Tiwari of the University of Melbourne, Australia, to examine the deeper drivers of the country’s affordability crisis, the structural constraints that local planning systems and private land ownership place on supply, the role of housing finance and bank behaviour in sustaining ever-rising prices, and the possible pathways, including the emerging knowledge economy and university-led innovation precincts through which Australia might chart a different course.
1. What is the most pressing problem in Australian housing today, and what dynamics are driving it?
Housing affordability is now widely regarded as the central housing problem in Australia. House prices have risen much faster than household incomes, making homeownership increasingly difficult, especially for the younger generation, which widens the intergenerational wealth divide. This has already prompted a serious intergenerational housing inequity, with the heart of this inequity lying in how wealth has been built through housing investment since the Baby Boomer generation. Locked out of ownership, young people are losing an important route to long-term wealth accumulation. Further, the problem is not only confined to ownership anymore: phenomenal growth of rents has also made renting, once seen as an affordable fallback for those priced out of ownership, more expensive and less secure.
Underlying these two dynamics is a persistent shortfall in supply. COVID-19 disrupted construction supply chains and increased building costs, while subsequent increases in interest rates further weakened the feasibility of new projects. What sits as a structural constraint has been lengthy local development approvals, limited development opportunities in high-demand locations, land availability constraints, and land-use planning restrictions. Together, these factors create a reinforcing cycle that fuels the long-term and lasting price growth (Figure 1). Therefore, the affordability crisis Australia faces today is best understood not as a single failure but as the complex interaction of a financialised approach to housing wealth and a supply system unable to keep pace on multiple fronts at once.
2. In light of the widely acknowledged housing deficit, what structural impediments continue to hinder supply expansion?
Firstly, Australia’s housing system largely sits within the government system, which involves federal, state, and local governments (Table 1), while planning and development decisions rest with local government under the state frameworks. Local councillors are directly accountable to the residents who already live in the area under consideration. The result is a pronounced ‘not in my backyard’ effect (NIMBY): existing residents routinely oppose major developments nearby, and local authorities, dependent on their electorate, have little incentive to approve projects against their wishes. Losing an election over a contested development is a real risk that council members are unwilling to run.
High-density public or social housing projects in established areas may face particularly strong opposition with perceived adverse impacts on parking, green space, safety, and neighbourhood character even though the design of public housing has evolved and moved away from the historically high-rise blocks. Private developer contribution to affordable housing in local government areas is mainly subject to negotiation with local council during the planning approval process, without intervention from state or federal government or a coordinated national housing strategy.
Secondly, planning regulations compound the problem. For instance, parking-ratio requirements, based on outdated car-ownership assumptions, ignore the reality that inner-city residents now drive less and rely more on public transport and bicycles. Yet developers cannot obtain approval unless they satisfy these obsolete standards, adding unnecessary expenses to projects like build-to-rent located in the city or inner suburbs that would otherwise have lower parking requirements. Zoning in city locations further constrains housing development by forcing it to compete with higher‑value office, retail, or other uses on the same land, which often outbid residential projects. The absence of a specific land‑use category for affordable housing restricts supply. Fragmented private landownership also slows site assembly for denser development, even in areas designated for transit‑oriented growth, because developers must negotiate with multiple individual owners before construction can begin.
Furthermore, information asymmetry between developers and planning authorities, where developers hold superior market data, strengthens their bargaining position, and prolongs approvals, as they negotiate over project design and affordable-housing quotas. Although a few proactive outer-suburban councils have used more collaborative approaches to support large-scale master planned community development projects with rental and ownership housing, partly because land is more abundant and negotiations are easier there than in the inner city.
Table 1 Housing-related roles across Australia’s three tiers of government
Source: Productivity Commission, 2011
3. Who builds affordable and social housing in Australia? Why do governments repeatedly promise more affordable housing yet delivery consistently falls short of what was pledged?
Election promises on housing supply are common in Australia, yet delivery consistently falls short of policy targets. The underlying constraint is structural: housing construction is predominantly private-sector led while subsidies are often difficult to access, and governments don’t have capacity to build at scale. As a result, private developers shoulder much of the cost and risks, while mechanisms such as Affordable Housing Bond Aggregator loans are available only to Community Housing Providers (CHPs) developing social housing.
CHPs, however, with their limited financial capacity, find it difficult to compete for land, which further constrains large-scale provision of affordable housing. Affordable housing is increasingly becoming reliant on public–private partnerships, government land contributions and zoning policies that ring-fence land supply. Given the scarcity and high cost of centrally located land, affordable housing provided by the private sector is often concentrated on the urban fringe, creating a mismatch between housing locations and employment opportunities for those who rely on affordable housing supply, such as key workers. Weaker transport connectivity of urban fringe locations and inadequate community infrastructure further limit accessibility and livability.
The gap between policy commitments and housing outcomes is further exacerbated by policy uncertainty and limited institutional capacity. Policy changes and contested reforms can weaken policy credibility and accountability, while the worsening housing crisis has increased the political salience of issues such as negative gearing and migration. Negative gearing (Figure 2) remains a prominent feature of Australia’s housing policy debate because it allows investors to offset eligible rental property losses against other taxable income. In comparison, although migration is frequently cited as a driver of rising house prices, empirical evidence suggests its effects are spatially concentrated and insufficient to explain citywide price escalation.
Restrictive land-use regulations and lengthy planning approval processes have more significantly constrained housing supply. Institutional capacity also remains a critical challenge. Many planning authorities lack the resources and capacity to modernise outdated planning standards and rules, contributing to the persistent gap between policy commitments and housing delivery.
Figure 2 Hot Property: Negative Gearing and Capital Gains Tax (2016)
4. What explains the sustained resilience of Australian house prices, and what are the long-term consequences for renters and younger generations?
Australian house prices have shown what can only be described as a secular rise when the market has not experienced a sustained fall in the twenty-five years since 2000. Even the 2008 global financial crisis, which triggered sharp corrections in many other advanced economies, left prices in Australian cities largely unaffected. The price-to-income ratio now sits at roughly seven to eight, a level widely referred to as severely unaffordable, yet predictions of a correction have repeatedly failed to materialise (Figure 3).
Firstly,part of the explanation lies in Australia’smacroeconomic resilience. Australian economy remained relatively stable during both the 2008 global financial crisis and the COVID-19 pandemic, enabling households to continue servicing mortgages despite rising housing costs. Fundamentally, the persistence of high house prices reflects Australia’s political economy. Government policy has long prioritised homeownership, with housing functioning not only as shelter but also as the primary store of household wealth. Consequently, governments have been reluctant to support policies that could negatively impact house prices, as declining house prices would be perceived as policy failures and could undermine the retirement security of older homeowners whose wealth is heavily concentrated in housing. As a result, demand-side incentives have generally received greater political support than supply-side or price-correcting reforms.
Secondly, the financial sector exacerbateshousing affordability issues. Recent research suggests that Australian banks have charged mortgage rates above what a competitive market should entail, increasing borrowing costs, with the heaviest burden on lower-income borrowers. This pricing is sustained by a highly concentrated banking sector, with limited regulatory attention to mortgage pricing. Meanwhile, conservative loan-to-value ratios and full-recourse lending shield banks from financial risk, reducing pressure for pricing reform—together entrenching affordability challenges and blocking systemic change.
The costs of the housing system are borne disproportionately by renters and younger generations. Rental supply remains constrained, housing quality is uneven, and short-term lease arrangements provide limited tenure security. For younger households, opportunities to accumulate wealth through homeownership have diminished substantially compared with previous generations. Although family support for housing deposits exists, it is generally limited and inherited housing wealth is increasingly uncertain. As a result, younger Australians are expected to retire with significantly lower levels of wealth than earlier generations. These outcomes are reinforced by a financial and policy framework that continues to favour existing homeowners and sustain high house prices, further widening intergenerational inequality.
Figure 3 International House Price-to-Income Ratios 1987/1992 TO 2024
5. Is migration a key driver, and to what extent has it had an impact? What spatial and functional features of economic activity deserve closer attention?
The impact of migration is felt predominantly in the most supply-constrained cities of the country. Migration has been the primary driver of Australia’s population growth for several decades, sustaining a relatively younger demographic profile and supporting long-term economic growth. However, most migrants continue to concentrate in central city locations of large cities such as Melbourne and Sydney. Chinese migrants do contribute to housing demand, but their impact is not as strong as commonly perceived. Migrants are generally younger and, particularly those on temporary visas, face additional barriers to homeownership, including foreign-investor taxation and lack of access to formal finance from banks. As a result, they typically remain in the rental market for an extended period before purchasing housing, meaning migration exerts a much greater influence in the rental market than the owner-occupied sector.
Foreign investment more broadly sits in a distinct regulatory framework: purchases require approval through the national investment review process and may attract additional tax, while permanent residents buying for their own use are treated as domestic buyers regardless of nationality. Land taxes on investment properties and vacancy taxes on unoccupied dwellings are meant to discourage speculation and improve utilisation, although both remain limited in scope and have had only modest effects on investment behaviour and market outcomes.
Beyond migration, the more fundamental challenge lies in the spatial concentration of economic activity. Employment and population remain concentrated in a small number of metropolitan areas, while many regions lack the industrial capacity to support sustained settlement. The decline of manufacturing has further reinforced the concentration of population in large cities. Within these cities, automation and digital technologies have increased productivity and wages for high-skilled workers while reducing demand for routine and entry-level jobs. Concentration of high income in cities has resulted in house price inflation in the presence of inelastic housing supply. As AI accelerates this transition, employment may become increasingly polarised, limiting younger workers’ access to stable, well-paid careers, and weakening their capacity to afford housing or accumulate housing wealth.
Promoting balanced regional development through public investment in knowledge‑economy precincts offer a potential way forward. International examples—such as China’s industrial parks, the UK’s Oxford–Cambridge Corridor, and Silicon Valley—show that university‑anchored innovation districts can boost employment and investment, but also risk worsening housing affordability if unmanaged. Australian universities already contribute through campus expansion programs and establishment of research precincts, yet Australia has invested far less than, for example, China or Japan, in coordinated, university‑led districts that integrate housing, transport, and community infrastructure. Expanding such place‑based investment could diversify economic activity beyond central cities like Melbourne and Sydney, supporting both long‑term housing affordability and more balanced regional development.
Dialogue photo: Prof. Piyush Tiwari and Dr. Yunqing Xu
Prof. Piyush Tiwari
Professor of Property at the Faculty of Architecture, Building and Planning, University of Melbourne, Australia
Piyush Tiwari is Professor of Property at the Faculty of Architecture, Building and Planning, University of Melbourne, Australia. He is Editor-in-Chief of the Journal of Property Research and Trustee of the Property Research Trust. He previously served as Director of Policy at the Infrastructure Development Finance Company (IDFC) in India, where he worked with national and state governments to formulate policies for the private financing of urban infrastructure. He has published extensively on issues related to real estate and infrastructure and has served as President of the Asian Real Estate Society in 2016 and 2025. His recent research addresses housing affordability, the role of housing in household well-being, Build-to-Rent, land-based financing mechanisms, and policies related to net zero cities. His work has informed policy internationally and has been referenced by the OECD, RICS, ADBI and other institutions. He is a co-author of UN-Habitat’s World Cities Report 2026: Global Housing Crisis — Pathways to Action.
The Australian Housing Puzzle:
A Homeownership Nation Where Prices Never Fall
Introduction
For the past twenty-five years, Australian house prices have maintained an almost uninterrupted upward trajectory, surviving the 2008 global financial crisis and the COVID-19 pandemic without a sustained correction. As younger generations find home ownership increasingly out of reach, an intergenerational wealth divide is widening, while those who turn to renting instead face a rental market whose supply keeps tightening and whose tenancies offer little security. In this dialogue, we speak with Professor Piyush Tiwari of the University of Melbourne, Australia, to examine the deeper drivers of the country’s affordability crisis, the structural constraints that local planning systems and private land ownership place on supply, the role of housing finance and bank behaviour in sustaining ever-rising prices, and the possible pathways, including the emerging knowledge economy and university-led innovation precincts through which Australia might chart a different course.
1. What is the most pressing problem in Australian housing today, and what dynamics are driving it?
Housing affordability is now widely regarded as the central housing problem in Australia. House prices have risen much faster than household incomes, making homeownership increasingly difficult, especially for the younger generation, which widens the intergenerational wealth divide. This has already prompted a serious intergenerational housing inequity, with the heart of this inequity lying in how wealth has been built through housing investment since the Baby Boomer generation. Locked out of ownership, young people are losing an important route to long-term wealth accumulation. Further, the problem is not only confined to ownership anymore: phenomenal growth of rents has also made renting, once seen as an affordable fallback for those priced out of ownership, more expensive and less secure.
Underlying these two dynamics is a persistent shortfall in supply. COVID-19 disrupted construction supply chains and increased building costs, while subsequent increases in interest rates further weakened the feasibility of new projects. What sits as a structural constraint has been lengthy local development approvals, limited development opportunities in high-demand locations, land availability constraints, and land-use planning restrictions. Together, these factors create a reinforcing cycle that fuels the long-term and lasting price growth (Figure 1). Therefore, the affordability crisis Australia faces today is best understood not as a single failure but as the complex interaction of a financialised approach to housing wealth and a supply system unable to keep pace on multiple fronts at once.
Figure 1 Australia – Selected residential property prices, Real, Index, 2010 = 100
(Source: Bank for International Settlements (2026), Residential property prices,
BIS WS_SPP 1.0 (data set), https://data.bis.org/topics/RPP/BIS%2CWS_SPP%2C1.0/Q.AU.R.628)
2. In light of the widely acknowledged housing deficit, what structural impediments continue to hinder supply expansion?
Firstly, Australia’s housing system largely sits within the government system, which involves federal, state, and local governments (Table 1), while planning and development decisions rest with local government under the state frameworks. Local councillors are directly accountable to the residents who already live in the area under consideration. The result is a pronounced ‘not in my backyard’ effect (NIMBY): existing residents routinely oppose major developments nearby, and local authorities, dependent on their electorate, have little incentive to approve projects against their wishes. Losing an election over a contested development is a real risk that council members are unwilling to run.
High-density public or social housing projects in established areas may face particularly strong opposition with perceived adverse impacts on parking, green space, safety, and neighbourhood character even though the design of public housing has evolved and moved away from the historically high-rise blocks. Private developer contribution to affordable housing in local government areas is mainly subject to negotiation with local council during the planning approval process, without intervention from state or federal government or a coordinated national housing strategy.
Secondly, planning regulations compound the problem. For instance, parking-ratio requirements, based on outdated car-ownership assumptions, ignore the reality that inner-city residents now drive less and rely more on public transport and bicycles. Yet developers cannot obtain approval unless they satisfy these obsolete standards, adding unnecessary expenses to projects like build-to-rent located in the city or inner suburbs that would otherwise have lower parking requirements. Zoning in city locations further constrains housing development by forcing it to compete with higher‑value office, retail, or other uses on the same land, which often outbid residential projects. The absence of a specific land‑use category for affordable housing restricts supply. Fragmented private landownership also slows site assembly for denser development, even in areas designated for transit‑oriented growth, because developers must negotiate with multiple individual owners before construction can begin.
Furthermore, information asymmetry between developers and planning authorities, where developers hold superior market data, strengthens their bargaining position, and prolongs approvals, as they negotiate over project design and affordable-housing quotas. Although a few proactive outer-suburban councils have used more collaborative approaches to support large-scale master planned community development projects with rental and ownership housing, partly because land is more abundant and negotiations are easier there than in the inner city.
Table 1 Housing-related roles across Australia’s three tiers of government
Source: Productivity Commission, 2011
3. Who builds affordable and social housing in Australia? Why do governments repeatedly promise more affordable housing yet delivery consistently falls short of what was pledged?
Election promises on housing supply are common in Australia, yet delivery consistently falls short of policy targets. The underlying constraint is structural: housing construction is predominantly private-sector led while subsidies are often difficult to access, and governments don’t have capacity to build at scale. As a result, private developers shoulder much of the cost and risks, while mechanisms such as Affordable Housing Bond Aggregator loans are available only to Community Housing Providers (CHPs) developing social housing.
CHPs, however, with their limited financial capacity, find it difficult to compete for land, which further constrains large-scale provision of affordable housing. Affordable housing is increasingly becoming reliant on public–private partnerships, government land contributions and zoning policies that ring-fence land supply. Given the scarcity and high cost of centrally located land, affordable housing provided by the private sector is often concentrated on the urban fringe, creating a mismatch between housing locations and employment opportunities for those who rely on affordable housing supply, such as key workers. Weaker transport connectivity of urban fringe locations and inadequate community infrastructure further limit accessibility and livability.
The gap between policy commitments and housing outcomes is further exacerbated by policy uncertainty and limited institutional capacity. Policy changes and contested reforms can weaken policy credibility and accountability, while the worsening housing crisis has increased the political salience of issues such as negative gearing and migration. Negative gearing (Figure 2) remains a prominent feature of Australia’s housing policy debate because it allows investors to offset eligible rental property losses against other taxable income. In comparison, although migration is frequently cited as a driver of rising house prices, empirical evidence suggests its effects are spatially concentrated and insufficient to explain citywide price escalation.
Restrictive land-use regulations and lengthy planning approval processes have more significantly constrained housing supply. Institutional capacity also remains a critical challenge. Many planning authorities lack the resources and capacity to modernise outdated planning standards and rules, contributing to the persistent gap between policy commitments and housing delivery.
Figure 2 Hot Property: Negative Gearing and Capital Gains Tax (2016)
Source: https://grattah.edu.au/report/hot-property/
4. What explains the sustained resilience of Australian house prices, and what are the long-term consequences for renters and younger generations?
Australian house prices have shown what can only be described as a secular rise when the market has not experienced a sustained fall in the twenty-five years since 2000. Even the 2008 global financial crisis, which triggered sharp corrections in many other advanced economies, left prices in Australian cities largely unaffected. The price-to-income ratio now sits at roughly seven to eight, a level widely referred to as severely unaffordable, yet predictions of a correction have repeatedly failed to materialise (Figure 3).
Firstly, part of the explanation lies in Australia’s macroeconomic resilience. Australian economy remained relatively stable during both the 2008 global financial crisis and the COVID-19 pandemic, enabling households to continue servicing mortgages despite rising housing costs. Fundamentally, the persistence of high house prices reflects Australia’s political economy. Government policy has long prioritised homeownership, with housing functioning not only as shelter but also as the primary store of household wealth. Consequently, governments have been reluctant to support policies that could negatively impact house prices, as declining house prices would be perceived as policy failures and could undermine the retirement security of older homeowners whose wealth is heavily concentrated in housing. As a result, demand-side incentives have generally received greater political support than supply-side or price-correcting reforms.
Secondly, the financial sector exacerbates housing affordability issues. Recent research suggests that Australian banks have charged mortgage rates above what a competitive market should entail, increasing borrowing costs, with the heaviest burden on lower-income borrowers. This pricing is sustained by a highly concentrated banking sector, with limited regulatory attention to mortgage pricing. Meanwhile, conservative loan-to-value ratios and full-recourse lending shield banks from financial risk, reducing pressure for pricing reform—together entrenching affordability challenges and blocking systemic change.
The costs of the housing system are borne disproportionately by renters and younger generations. Rental supply remains constrained, housing quality is uneven, and short-term lease arrangements provide limited tenure security. For younger households, opportunities to accumulate wealth through homeownership have diminished substantially compared with previous generations. Although family support for housing deposits exists, it is generally limited and inherited housing wealth is increasingly uncertain. As a result, younger Australians are expected to retire with significantly lower levels of wealth than earlier generations. These outcomes are reinforced by a financial and policy framework that continues to favour existing homeowners and sustain high house prices, further widening intergenerational inequality.
Figure 3 International House Price-to-Income Ratios 1987/1992 TO 2024
Source: Dermographia International Housing Affordability, 2025, https://www.newgeography.com/files/Demographia-International-Housing-Affordability-2025-Edition
5. Is migration a key driver, and to what extent has it had an impact? What spatial and functional features of economic activity deserve closer attention?
The impact of migration is felt predominantly in the most supply-constrained cities of the country. Migration has been the primary driver of Australia’s population growth for several decades, sustaining a relatively younger demographic profile and supporting long-term economic growth. However, most migrants continue to concentrate in central city locations of large cities such as Melbourne and Sydney. Chinese migrants do contribute to housing demand, but their impact is not as strong as commonly perceived. Migrants are generally younger and, particularly those on temporary visas, face additional barriers to homeownership, including foreign-investor taxation and lack of access to formal finance from banks. As a result, they typically remain in the rental market for an extended period before purchasing housing, meaning migration exerts a much greater influence in the rental market than the owner-occupied sector.
Foreign investment more broadly sits in a distinct regulatory framework: purchases require approval through the national investment review process and may attract additional tax, while permanent residents buying for their own use are treated as domestic buyers regardless of nationality. Land taxes on investment properties and vacancy taxes on unoccupied dwellings are meant to discourage speculation and improve utilisation, although both remain limited in scope and have had only modest effects on investment behaviour and market outcomes.
Beyond migration, the more fundamental challenge lies in the spatial concentration of economic activity. Employment and population remain concentrated in a small number of metropolitan areas, while many regions lack the industrial capacity to support sustained settlement. The decline of manufacturing has further reinforced the concentration of population in large cities. Within these cities, automation and digital technologies have increased productivity and wages for high-skilled workers while reducing demand for routine and entry-level jobs. Concentration of high income in cities has resulted in house price inflation in the presence of inelastic housing supply. As AI accelerates this transition, employment may become increasingly polarised, limiting younger workers’ access to stable, well-paid careers, and weakening their capacity to afford housing or accumulate housing wealth.
Promoting balanced regional development through public investment in knowledge‑economy precincts offer a potential way forward. International examples—such as China’s industrial parks, the UK’s Oxford–Cambridge Corridor, and Silicon Valley—show that university‑anchored innovation districts can boost employment and investment, but also risk worsening housing affordability if unmanaged. Australian universities already contribute through campus expansion programs and establishment of research precincts, yet Australia has invested far less than, for example, China or Japan, in coordinated, university‑led districts that integrate housing, transport, and community infrastructure. Expanding such place‑based investment could diversify economic activity beyond central cities like Melbourne and Sydney, supporting both long‑term housing affordability and more balanced regional development.
Dialogue photo: Prof. Piyush Tiwari and Dr. Yunqing Xu