House price vs. income exposes a brutal reality for Millennials

In Australian society, there are few things that can evoke as much passion and emotion as our homes. They are the family ‘Castle’, a little slice of our nation where we make memories, raise families and become part of our wider communities.

While Australians may take the relative importance of home ownership and turn it up to 11, around the globe home ownership is still often seen as a key factor in ensuring everyday people feel like they have a stake in society.

Over the history of our nation, the importance of home ownership to our broader society has long been acknowledged, from the 1940s radio broadcasts of Robert Menzies who would go on to found the Liberal Party, to modern day Senate committees.

In his most famous address in May 1942, Menzies extolled the virtues of home ownership:

“The home is the foundation of sanity and sobriety; it is the indispensable condition of continuity; its health determines the health of society as a whole…” he said.

The history

Despite the heavy emphasis Menzies and his successors placed on the importance of home ownership, in more recent decades rising housing prices have seen that goal pushed increasingly out of reach for hundreds of thousands of Australians.

In June of 2001, it took an average of six years to save for a 20 per cent deposit for a home at a national level, 6.2 years in the capital cities and five years in regional areas.

Across the same time period, the value to income ratio of dwellings – that is median dwelling value vs. the median household income – has gone from 4.5 to 8.5 nationally, from 4.7 to 8.3 in the capital cities and from 3.8 to 8.0 in regional areas.

It’s worth noting that during this period that apartment and unit construction has shifted the median dwelling price slightly away from the median house price.

A rising issue?

Despite property prices increasingly rising out of reach for hundreds of thousands of Australians over the past two decades, the political cost for governments who’ve seen this happen on their watch has been relatively minimal.

While governments at a state and federal level have implemented policies ostensibly directed at housing affordability, such as first homeowner grants, various investigations have concluded that in the long-term they were at best unsuccessful in their stated aims.

In recent years, the issue of housing affordability has taken on an even greater degree of importance for parties across the political spectrum. While part of this is arguably driven by generally younger non-homeowners seeing the value of their deposits evaporate during Covid and prices rise further out of reach, demographic changes are also driving something of a rethink.

As Australians age and increasingly see their children and grandchildren forced to look for a home further afield or even interstate, former Prime Minister John Howard’s quip that no homeowner ever complained about rising property prices is looking like its on increasingly shaky ground.

The hard data

According to data from the Australian National University (ANU) at the 2019 election, homeowners overwhelmingly gave their first preference vote to the Coalition, with the bloc earning 50 per cent of the demographic’s votes.

On the other hand, the Coalition received just 27 per cent of the first preference votes of renters, while Labor received 41 per cent.

Among homeowners the Greens achieve just a 6 per cent share of the vote, but among renters they managed to get 20 per cent.

Amid a political environment defined by a resurgent Labor and the rise of left-leaning independents, home ownership is shaping up as a major issue for the Coalition for the foreseeable future.

But Labor is not immune. In its traditional inner-city heartlands, it faces the shift in demographics towards renters and the Greens placing a heavy emphasis on how housing is unaffordable.

The ballot box

As the results of last weekend’s Victorian election became clear, federal Greens leader Adam Bandt took to Twitter to celebrate his party’s best ever Victoria state election result. In his Twitter thread, Bandt credited the Greens push for affordable housing as one of the major factors driving the party’s vote.

On the other side of politics, Federal Liberal MP Keith Wolahan recently made the case that falling levels of home ownership was part of the reason why the party was struggling on polling day in recent elections.

After spending the last three election cycles defending policies like the capital gains tax discount and negative gearing, which some experts say are artificially inflating property prices, Wolahan’s argument is quite a challenging one for the Liberal Party.

“Are we the party of inner-city anaesthetists who vote teal and own ten rentals? Or are we the party of young families looking to own their first piece of Australia? Every lever must be on the table,” Wolahan said.

As the issue of home ownership once again rises to the forefront, one imagines that the major parties may increasingly find those within their ranks like Wolahan who believe a different path needs to be taken going forward.

For decades high housing prices came with little political cost to the major parties and encouraged Australians to borrow hundreds of billions of dollars against their home to fund everything from renovations to family holidays.

But as demographics change and Australians age, the politics of home ownership are rapidly evolving to potentially be a major political problem for the major parties.

Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator

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