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- [00:02]
Julia Karkatzel
Housing affordability in Australia is at an all time low and it's left young people rethinking the dream of home ownership, something previous generations had taken for granted. I'm Julia Karkatzel and you're listening to the Morning Edition from the Age and the Sydney Morning Herald. Today, property reporter Caroline Zelensky on whether we can or should return to the great Australian dream, the enduring belief that home ownership and can lead to a better life. Caroline, welcome to the podcast.
- [00:37]
Caroline Zelensky
Thank you very much.
- [00:38]
Julia Karkatzel
So you've been reporting on housing in Australia, and when we think about the 1950s, life looked very different for Australians aspiring to own their own home. Can you paint a bit of a picture for us of what life looked like?
- [00:52]
Caroline Zelensky
Well, the way I approached this was to find people who actually lived during that time and bought houses. I find that a lot of reporting sort of about boomers finding their houses, it's based in the economics. So I thought, why don't I just find someone who's 80 plus and actually ask them how it was. And one of those people was Neil Robertson. He's 77 and he bought his first house in Fitzroy, so an inner city suburb in Melbourne, for $7,500.
- [01:23]
Neil Robertson
I don't think I saved up at all. And I think I put 1,500 as a deposit on the house and I paid it off monthly at around about $100, maybe a little bit more a month.
- [01:33]
Caroline Zelensky
Neil, like many of his generation, he did what was expected. He worked hard, he bought a home, he fixed it up. These houses weren't like what we expect now. They were pretty dilapidated. There was an outhouse outside.
- [01:47]
Neil Robertson
It was a small terrace. It had two power points, one for the toaster, one for the fridge.
- [01:54]
Caroline Zelensky
So he sort of spent his time building it and sort of his uncle helped him fix it up.
- [01:59]
Neil Robertson
So that took quite some time. I did it room by room.
- [02:02]
Caroline Zelensky
I talked to other people as well, a couple in their 90s and my colleague Alice Uribe talked to people in Sydney about this and we sort of all found out that most of these people paid off their mortgage by 30 or 40, which kind of hurts because today's my 38th birthday and I'm not close to paying off my mortgage. Let's put it there. Not Neil, but other people like him ended up buying extra houses or, you know, it was quite manageable back then. I think houses cost about three and a half times the average wage. You know, they, they maybe bought an investment property, a small nest egg for the kids. You know, their decisions were were quite rational, they were measured, they were even humble. The houses weren't huge, they weren't home cinemas. But the thing is that read through the eyes of generations today, younger generations, these choices, these opportunities are what many believe have contributed to their own difficulties in achieving the same sort of Australian dream.
- [03:05]
Julia Karkatzel
And so tell me more about what it actually meant to own a home back in that time. Because there was an ideology, a political ideology underpinning it, wasn't there?
- [03:14]
Caroline Zelensky
Yes, there was. So in that time, you know, if you cast your mind back to the Second World War, a lot of soldiers came back and there was this political will to make sure that they had somewhere to live, somewhere affordable to buy a house. And there was all these policies that came in. A lot of them were led by Robert Menzies, who was the longest serving Australian Prime Minister, who helped cement property ownership in the Australian psyche. He and his government, and also, you know, the opposition also thought that it was very important that everyone has access to a house because he believed that if Australians owned their own home, they would have a bigger stake in the country. So effectively becoming, you know, little capitalist, you, you would care about your country a little bit more because you owned a stake in it. And looking forward to an attack on the great problems of Australia, all that I want to say about those problems is that I don't believe they're problems for one section of the Australian people. The problem of Australian security, for example.
- [04:13]
Julia Karkatzel
So what were some of those policies that did actually help that dream come alive?
- [04:18]
Caroline Zelensky
Well, between the end of the Second World War and sort of the late 1970s, house prices were really stable. They were about, as I mentioned before, three and a half times the average weekly earnings. But governments, I think both believe that the primary role was to boost housing supply. So in the 1950s, nearly one in five homes were built by government. So they actually built these homes for people, which has significantly reduced today. But you know, many of them may have been sort of poorly located. That's sort of where your broad meadows in Melbourne and outer suburb in the northwest exist. So they were poorly serviced amenities, but they at least provided secure housing for people at an affordable price for both homeowners and for the renters. And in 1963, Menzies introduced the first homeowners grant scheme, which shifted government policies from boosting supply towards inflating demand. And that's sort of where we start to see the changes creeping in. It would take a while until that happened, but you sort of start getting that, that feeling that housing is a little Bit more than just somewhere to live. It might be a pathway towards building wealth.
- [05:26]
Julia Karkatzel
So tell me more about those main drivers that I guess have made housing unaffordable in the end. So we're talking about grant schemes, negative gearing, different tax changes that do end up inflating demand.
- [05:38]
Caroline Zelensky
Well, it's a really complicated situation, as you can imagine, and it includes that shift towards seeing housing as a vehicle for wealth building rather than just somewhere to live. So this is underpinned by a bunch of policies that were introduced by both government since the 70s. So you got the changes to capital gains tax concessions which made it easier for investors to purchase property. So as a result, more home loans were taken out by investors largely to buy established properties, which experts say have actually driven up prices. Local governments have also made it more expensive to redevelop in these established suburbs. That's all that sort of zoning laws that you hear. And the suburbs you're thinking are the sort of inner and mid city suburbs in a lot of these capital cities that have high amenity, good access to school, public transport, sort of these places where most people want to live. But it's very difficult now to redevelop that into higher density living. As Australia tends to build a lot of detached housing. We really love our big houses that are sort of not units or apartments. As a result, we've left a lot of those detached big houses now in the greenfield sites which are sort of outer suburbs really far from the city, 30 km plus, which have a lot less amenities and infrastructure. And that's, that's a problem. You know, they have less schools, they have less access to a lot of things. I mean, you probably often hear, I mean, I'm from Melbourne, but you know, Sydney as well, traffic problems, you can't get in. Now the governments are all playing catch up, really trying to connect those outer suburbs to sort of the city and stuff like that. So, but the problem is that's still where the land is available to build. So trying to now retrofit some of these inner suburbs is proving very difficult on a variety, on federal, state, local government levels.
- [07:30]
Julia Karkatzel
So all those drivers combined have meant that houses are exorbitantly expensive and people are moving further out. And the prospect of home ownership for a lot of people, including myself, looks very different to the 1950s. Can you tell me about some of the people you spoke to about that?
- [07:48]
Caroline Zelensky
Yeah. So you know, as a sort of a first, you know, to say like a lot of people are still buying into the market. Right. Like the problem is Today, a lot of younger generations have to rely on sort of the bank of mum and dad, as we've heard about, or they have to live really, really far away, which is often quite difficult if you want to live sort of in the inner city. You're looking at millions and millions. Sydney as a. It's a total outlier, like Sydney is insane. And I am very sad for my colleagues. They don't. Everyone who lives there, I just don't know.
- [08:23]
Will or Katie
So true.
- [08:23]
Caroline Zelensky
Yeah. At least in Melbourne you can get something. Yeah. Australians median dwelling value is now $901,000 according to the Totality Home Value Index. You know, that's compared with a median annual household pre tax income of $104,000, which means it would take 11 years to save a 20% deposit, which is the most on record. As a result, more than half of the people born in the late 1980s. Hello. Did not own their own home by their early 30s. And we are the first generation to do so.
- [08:57]
Julia Karkatzel
How are the younger generations of today making it work then?
- [09:00]
Caroline Zelensky
We tried to find sort of the different ways younger generations are making do with home ownership that is a little bit different to the baby boomers and maybe the Gen X's and how they sort of approach this. So I interviewed, you know, a couple of migrants, Ricky and his wife Sherry, and Ricky and his brother and his wife worked a couple of jobs over four years so they could save a 10% deposit for that big house that is still part of that Australian dream. It's more freedom because when you're living with someone else, it's hard. You can't do things the way you want it. But when it's your home, you can design it your way and everything. Yeah.
- [09:39]
Sherry
Yes, that's right. Yeah. That's another thing.
- [09:41]
Caroline Zelensky
Yeah, yeah. They ended up buying in the outskirts in Craigieburn, which is about 30km north of Melbourne CBD.
- [09:48]
Sherry
The houses are getting unaffordable now because when we bought this property, things were different. You know, like we bought, as I said, we bought this house for 380,000, which was like decent amount for a 490 square meter block. But now getting the same block or maybe same house, it's like more than double. And it's not even 10 years, you know, it's nearly 10 years here.
- [10:11]
Caroline Zelensky
I also ended up talking to people like Will and Katie. Will and Katie are a little bit different. They've decided to rent at least for the time being, if not forever. They have three children, three young children and the kind of house they want in the area they want, they cannot afford or they've made, they've done the numbers. We're talking two plus million again. For our Sydney audience, that's probably a drop in, in the water, but in, in Melbourne, it's quite expensive.
- [10:38]
Will or Katie
It was that commute back and forth to childcare, knowing childcare needed our firstborn to be picked up at a certain time, and us just having to constantly text each other and debate, oh, how are you going on the train? How am I going driving? We did that three times and that was enough to say, like, no, Clifton Hill is beautiful, but it's just too hard for our jobs right now. And I think because we also knew, like, eventually we'll be switching jobs. Like, you need to keep flexible, I'd say with your living location and your working location. And so I. It just makes more sense to find the right place for right now and be comfortable with your needs changing.
- [11:18]
Caroline Zelensky
So they've done the math and, you know, they don't see renting as a stepping stone to home ownership, but a rational response to what they consider an unstable market. It helps that they're not very sentimental, which means they can sort of uproot themselves whenever the kids grow up. And so it's fantastic to be able
- [11:34]
Neil Robertson
to kind of just change your house
- [11:35]
Caroline Zelensky
to meet your needs as opposed to spend this huge amount of money up front and kind of hope you've ticked off all the boxes into the future for.
- [11:44]
Will or Katie
Yeah. Or continuously fund the renovations to keep the house fitting.
- [11:49]
Caroline Zelensky
What your needs are, what they have is, you know, the keys to remain flexible and have alternative wealth plans. The couple says they have invested widely, including exchange traded funds, superannuation and US investments. And they have also emergency savings. Other people that we interviewed also have decided to move from a house to a unit. So that's a really interesting way of looking at it. Like in Australia, traditionally, we don't really consider apartments and units as a viable way of living. Right. We just kind of see it as a stepping stone towards getting your house, which is quite interesting. I've lived in Europe, I grew up in Europe. I lived there a couple of years ago again. And it's so normal to live in apartments. Like it's a whole different. We just have a totally different mentality to this. And I think we're at a point that we have to sort of start thinking of different ways of living rather than just in these big houses that are, you know, so expensive.
- [12:45]
Julia Karkatzel
We'll be right back. But there may be hope on the horizon. The current labor Government is hoping to tweak or enact some tax reform in the upcoming May budget. What kinds of things are they looking to change? And do you think that'll even scratch the surface?
- [13:13]
Caroline Zelensky
Well, we've heard that the treasurer, Jim Chalmers department is working on options to overhaul negative gearing modeling rules that would limit negative gearing to two investment properties, as well as plans to wind back the 50% capital gains discount, but only for investment properties. Now, this is not at all confirmed. It's sort of just been, you know, put out there into the world to see how people react. Personally, I don't think this will move the dial too much, but, I mean, it's a start. Critics say also that what it actually will take is for people who are homeowners to actually, unfortunately or fortunately, whichever way you look at it, to start sort of voting against their own interest and to sort of accept that they have the house. Like, is it actually reasonable to expect houses to keep rising and rising and rising? We're sort of in this mentality in Australia. We just expect the houses will just go up and up and up. But that just means that it makes it impossible for younger generations to get in without the help of parents and grandparents. And, you know, the government, I think, is a little bit reluctant to do big changes considering the bill shorten election. And I think that spooked them a fair bit. But I think it's a different time. I think they can take a bit more risks. But, you know, we'll see in May. Experts say that it will take a lot of political will, which we're sort of seeing the beginnings of, as well as homeowners essentially voting against their own interests so that their kids and grandkids can have a life that they have. And, you know, politicians know that at any point in time, there are 11 million Australians who own their own home, and there are about 2.5 million Australians who own at least one one investment property. I mean, there's a lot of overlap between those two. So that's close to about 12 million votes for policies that would keep house prices going up. Australia is not a very big country, so that is by far the majority. Like a lot of experts, I don't know how. How long this can keep going for. You know, at this point, people who bought a unit, potentially even 10 years ago, thinking that that's a stepping stone towards getting a bigger house or sort of moving up, they're effectively effectively have been priced out of the market, the housing market, which has grown so much faster and bigger than units have, and we have a lot of stories on that as well, if you guys want to have a look through that. But effectively, units have grown much, much less than houses. And even, you know, if you wanted to make that jump from an apartment to a house, you're probably looking at an entry level home, which at the moment in Melbourne is about $720,000 as a median. And that's just houses that are out, you know, out in, in 40, 50 kilometers out, which is fine if you work in the area and it's developed, but if you sort of work in the city or anywhere else, then it's. It's quite hard, honestly. I don't know. Like, I just feel like we're at a point where it's just like a pressure cooker. I just, I don't know how this is going to get solved without some major, major political willpower. And I think a lot of politicians don't want anyone to lose, right? Like, they're thinking they can solve the solution without anyone losing. But house prices have to stop rising. They have to stop going up, at the very least for people to catch up, for wages to catch up. It's just. There's no other way.
- [16:48]
Julia Karkatzel
Well, thank you very much for your time today, Caroline.
- [16:51]
Caroline Zelensky
Thank you very much, Julia. I really appreciate it.
- [17:01]
Julia Karkatzel
Today's episode was produced by me, Julia Karkatzel. Our executive producer is Tammy Mills, and our podcasts are overseen by Lisa Muxworthy and Tom McKendrick. If you like our show, follow the Morning Edition and leave a review for us on Apple or Spotify. Thanks for listening.