Are there any affordable homes left in Australia?

Twenty years ago, almost all houses and apartments sold in Australia were priced under $500,000. Ordinary families routinely bought houses on quarter-acre blocks and only the affluent elite were buying real estate above the million-dollar mark. At the time, we called them ‘millionaires’ and the term meant uber-wealth.

Over the next decade-and-a-half, the magnitude of change to home values was immense. After a period of very strong price growth over the 2000s and early 2010s, only 50 percent of the housing stock was selling below the half-million mark by 2015. And today, the proportion of homes selling below $500,000 has hit an all-time low at 24 percent of houses and 39 percent of apartments, according to a report by Ray White. Many families are adopting apartment living due to affordability constraints, and first home buyers in Sydney and Melbourne are routinely purchasing starter homes for $1 million or more.

Australia has not always been a rapid-growth property market. Price growth was extremely subdued between 1880 and the 1950s. Prices began moving up in the post-WW2 era due to accelerated population growth and the end of government property price controls in 1949, explains PropTrack economist Paul Ryan. Then came the credit boom after Australia’s finance industry was deregulated in the 1980s and 1990s. Ordinary citizens en masse were able to access funding to buy their own homes, and property prices have grown exponentially ever since, with one of the biggest spikes in values occurring in the late 1990s and early 2000s.

Sydney has been the powerhouse of Australia’s property price growth over the past two decades, with the median value of a house now exceeding $1.1 million. Nerida Conisbee, chief economist at Ray White, says that over the past 12 months, less than 10 percent of all Sydney properties sold for less than $500,000. “Affordability is better in regional Australia, however, finding a low priced home in regional NSW is getting particularly difficult,” Ms Conisbee said. “Well under a third of all properties are now priced under $500,000.”

Nerida Conisbee says regional areas represent greater affordability for buyers, but that is starting to change.

Over time, property prices in large regional towns with good road access to Sydney have boomed as people accepted a commuter lifestyle in exchange for the affordability that regional NSW offered. Today, those satellite cities are expensive themselves. For example, the median house price in Wollongong is $975,000, and on the Central Coast it is $890,000, according to CoreLogic data. A similar phenomenon has occurred in Victoria. The pandemic brought about the work-from-home era, which prompted many people to leave Australia’s two most expensive cities – Sydney and Melbourne – for more affordable markets, pushing up prices significantly in regional areas across the country.

Over the past five years, a change has occurred across the capital cities, with the two most affordable cities recording the strongest price growth. CoreLogic data shows Hobart house values have grown the most over the five years ending 31 July, with a 62.5 percent uplift to the median house price to $710,000, followed by Adelaide with a 46.7 percent increase to a median of $675,000.

Today’s rental crisis and the ongoing affordability challenges faced by young people have caused much political debate about how to boost Australia’s housing supply as quickly as possible. History shows that new supply is the key to keeping property prices affordable, and many experts argue that new high-density housing in areas with established infrastructure such as roads and services is the fastest way to provide more housing for the country’s rapidly growing population.

Ms Conisbee points out that high levels of apartment development in certain markets have kept prices more affordable. “Places where we have seen extremely high levels of apartment development have the most availability of low priced apartments,” Ms Conisbee said. “Gold Coast and Melbourne are expensive places to buy houses but there are a lot of low priced apartments in Melbourne CBD, Surfers Paradise and Southport.

“For houses, a strong development pipeline has kept outer Perth cheap with Baldivis and Armadale having the most houses being sold under $500,000 over the past 12 months. Canberra’s rapid building program has meant that the proportion of apartments sold under $500,000 drastically exceeds the number of houses sold under this price point.”

Australia’s housing crisis will not be solved by first-home buyer incentives or tax changes alone, with leading property figures warning governments must tackle supply constraints if affordability is to improve.

Speaking at the Kanebridge Quarterly Property Leadership Summit in Sydney last week, expert project marketing specialist Sam Elbanna, property investor and fund manager Paul Miron and property consultant Karla McNeice said that a lack of housing supply remained the central issue facing the market.

Elbanna, Director of CPM Realty with more than 30 years’ experience in project sales, argued that successive governments had focused too heavily on stimulating demand rather than addressing the barriers preventing new housing from being delivered.

“The misconception is that politicians think the way to solve the housing crisis is to drive demand,” he said.

“The reality is that’s not the way. This is a supply-side problem, and it needs to be solved on the supply side.”

Drawing on his experience in project sales, Elbanna said policies designed to help first-home buyers often had unintended consequences, pointing to previous grants that ultimately flowed through to higher property prices.

Instead, he said developers were facing increasing red tape, approval delays and rising costs, which were discouraging new housing supply.

“In the absence of stock, demand exceeds supply,” he said.

Miron, a Co-Founder and Fund Manager of Msquared Capital, said the housing debate had become overly focused on tax policy while overlooking broader structural issues.

He argued that affordability challenges stemmed from a combination of factors, including planning constraints, supply shortages, migration levels and interest rates.

“No-one can be 100 per cent certain on the real reason for property prices is going up,” he said.

“The reason why property prices are higher is a combination of interest rates, lack of supply, migration, vacancy rates and maybe taxes play a role.”

Miron was critical of recent federal housing policy changes, warning they could reduce the number of new homes being built and further constrain supply that was even highlighted in the budget.

He also highlighted the importance of the property sector to the broader economy, noting that residential real estate and related industries employed more than one million Australians.

McNeice, who advises developers on sales strategy and market intelligence, said understanding buyers had become increasingly important as affordability pressures intensified.

While affordability remained a major consideration, she said today’s buyers were focused on value rather than simply price.

“People are looking for value for money,” she said.

She said buyers were increasingly evaluating factors such as transport connections, walkability, nearby amenities and flexible living spaces that could accommodate changing family needs.

“What infrastructure is going on? Can I walk to the shops? Can I meet people at the local cafe?” she said.

The panel also discussed the mounting pressures facing developers, with Elbanna arguing that many projects become financially unviable from the moment a site is purchased.

“The viability of a development happens at the moment the site is bought,” he said.

He said rising construction costs, higher interest rates and overly optimistic feasibility assumptions had left some developers exposed as market conditions changed.

While acknowledging the growing number of smaller and first-time developers entering the market, Elbanna said property development required expertise across finance, construction, marketing and legal disciplines.

“It is actually a business that requires a level of expertise,” he said.

Looking ahead, the panel agreed opportunities remained in the market despite current challenges.

Miron said property should continue to be viewed as a long-term investment and cautioned against trying to time short-term market movements.

McNeice said success would increasingly depend on identifying projects that genuinely met changing buyer expectations.

Elbanna said affordable housing remained achievable, but developers needed to deliver more than just homes.

“We can provide affordable housing in this country,” he said.

“But we’ve got to wrap that affordable housing with the things that people want.”

As Australia’s housing affordability debate intensifies, the panellists agreed on one point: without a meaningful increase in housing supply, demand-side measures alone are unlikely to solve the nation’s property challenges.

Are there any affordable homes left in Australia?

Only one in four Australian houses sell for less than $500,000 today

Australia’s housing affordability crisis is being fuelled by chronic undersupply, planning delays and rising development costs, as politicians continue to focus on the wrong solutions.