Spotlight on Australia - April 2026

Much has been made of Australian house prices, particularly in Australia. A recent report claims that Australian residential property has never been less affordable. First home buyers now need to save over 11 years for a 20% house deposit. However, looking at house prices in other OECD countries suggests Australian houses are not that expensive. What are Australians complaining about? Could it be the level of household debt?

Australian house prices increased 47.3% between March 2020 and October 2025. Increased demand during the COVID-19 pandemic, followed by a return of demand from foreign students post pandemic combined with stubborn pandemic supply bottlenecks, all contributed to the increase in house prices.

Australians now need to save for around 11 years to reach a 20% home deposit (house or apartment); in Sydney, Australia’s most expensive city, it takes 16.7 years. This assumes a median income and a median house price. Those with lower incomes than the median or those wanting to buy a more expensive house can take even longer to save for a deposit. The affordability crisis is getting worse.

“... generations of young Australians are being held back financially by the cost of shelter, especially if they live somewhere near a CBD and especially in Sydney or Melbourne.” Alan Kohler, “The Great Divide: Australia's Housing Mess and How to Fix It”, Quarterly Essay, #92.

“Increasingly, buyers are relying on strategies like the bank of mum and dad, 'reinvestment' or using inheritance to buy into the property market,” Eliza Owen, Cotality, head of research.

But even before the COVID-19 pandemic, Australian house prices had been rising (see chart below).

There are several drivers behind this long-term rise in house prices. Financial deregulation in the 1980s led to wider access to home loans. Australia’s long period of uninterrupted economic growth between 1991 and 2020 and low interest rates throughout the 2000s and 2010s also contributed. Exempting the family home from capital gains tax and negative gearing for investment properties has also made property more attractive relative to other asset classes. Rising immigration during this century has increased demand. A rise in dual-income families may also be a cause or an effect of the rise in house prices.  

But house prices have become more expensive elsewhere too

However, what most Australians miss is that house prices, both absolute and relative to income, have been rising in most OECD countries since the 1990s. And when you compare Australia to many other OECD countries, Australian homes are not the most expensive (see chart below).

Further, when you look at total housing costs (mortgage or rent plus utilities and maintenance) relative to disposable income, Australian housing does not look too expensive at all (see chart below).

Australian household debt is an outlier

Where Australia does stand out with respect to housing, is household debt. Australian households have among the highest debt relative to both disposable income and GDP, and it is increasing (see charts below).

However, according to the RBA, the rising debt of Australian households is not necessarily a concern. Australian households are well paid and many Australians own multiple properties. Further, Australian banks are well regulated and collateralised. 

Not enough construction

Of course, an international comparison of prices is of little comfort to young Australians saving up for their first deposit.

However, international comparisons can point to possible solutions.

The most obvious solution for Australia is to build more houses. As the chart below shows, Australia has noticeably lagged other OECD countries in terms of increasing housing stock over the last two decades.

The federal government’s 5-year housing target and related policies are a step in the right direction, but 18 months into the plan, the government is 77,500 homes short of where it should be.

Most Australians live in capital cities where low-density housing (see chart below), zoning restrictions, and sometimes natural constraints make growing the housing stock difficult. All levels of government recognise the problem and are making changes, but not fast enough.

Australian governments could also do more to help first-home buyers and renters. They are doing something, but many other countries are doing much more (see charts below).

Final thoughts

Having your own home is more than a dream; it is a social contract. An increasing number of younger Australians are feeling locked out of both. However, Australia’s situation is not unique or even among the worst compared to other OECD countries. But Australia needs to do better to increase its housing stock. Household debt stands out, but it is not a macroeconomic concern.