Has housing reached breaking point?
Exploding prices, a growing divide and the policies that could change it all
The housing market in Australia has seen unprecedented growth in the past several months – but could that all be about to change?
Conflict overseas, economic turmoil and ongoing rate rises have stirred uncertainty and caution among buyers. But what are the long-term solutions to surging prices, and will the May federal budget’s hinted-at housing and tax reforms provide meaningful relief?
Contact sat down with real estate and finance expert Professor Shaun Bond from the Faculty of Business, Economics and Law to unpack the trends we’re already seeing and how economic pressures are impacting our housing market.
Professor Shaun Bond
The current state of the market
The divide between those who own property and those who don’t has rarely been wider, or more consequential. Sustained price growth and a rental market under severe stress have pushed a growing number of Australian households into genuine financial difficulty, and the data is striking.
Brisbane's median house value now exceeds $1.2 million, representing an increase of almost 95% over the past 5 years. In dollars, the median Brisbane home has appreciated by more than $100,000 in each of the past 2 years. For younger Australians attempting to enter the market without inherited equity or family assistance, these numbers represent not a temporary setback but a structural barrier.
Meanwhile, a growing cohort of older Australians also find themselves effectively excluded from a market they may once have assumed was accessible. The social consequences – the anxiety, the deferred family formation, the political disillusionment – are real and measurable.
What is equally true, and what tends to get lost in the urgency of public debate, is that there is no quick fix. The conditions that produced this crisis took decades to develop and resolving them will require sustained policy commitment rather than the short-term interventions that dominate election cycles.
First home guarantee scheme
The Federal Government's First Home Guarantee scheme, which allows eligible buyers to purchase with a 5% deposit without incurring lenders mortgage insurance, has played a role in sustaining prices at the entry level of the market. The policy is well-intentioned but stimulating demand without an equal increase of supply tends to raise housing prices rather than improving genuine affordability. This is a well-documented pattern in other countries.
Have prices reached the tipping point?
The cycle is turning, though not evenly across Australia. Residential property values rose 0.6% nationally in March, slightly down from the previous month, with Sydney and Melbourne recording modest falls while Brisbane, Adelaide and Perth continued to grow at a healthy pace. The gap between these cities shows the same affordability pressures unfolding, just at different stages.
While South East Queensland has strong momentum, buyers are becoming more discerning. For example, properties requiring renovations are sitting on the market for longer.
Several external factors are compounding this uncertainty. The Reserve Bank of Australia (RBA) raised the cash rate to 4.1% in March, with further increases looking likely. Sustained conflict in the Persian Gulf is keeping energy prices elevated, feeding directly into headline inflation and household cost-of-living pressures. The prospect of changes to negative gearing or the capital gains tax discount in the May federal budget, while not yet legislated, has introduced real uncertainty for property investors who underpin a substantial share of the private rental market.
A mild recession would also add further pressure to sentiment and transaction activity, though chronic undersupply would likely prevent the sharp corrections to housing price that some commentators have forecast.
Image: svetazi via Adobe Stock
Image: svetazi via Adobe Stock
The impact for renters
The rental market offers no such ambiguity. A well-functioning rental market typically requires a vacancy rate of between 2.5 and 4%, but in March the national vacancy rate fell to 1.6%. Brisbane's sits around that number, with rents increasing 6.7% year-on-year.
Currently, the market firmly favours landlords and there is unfortunately no credible solution for meaningful relief soon.
Should buyers purchase a home in this market?
For those considering a purchase, the evidence supports a long-term view rather reacting to short-term sentiment. Brisbane and South East Queensland have sound structural fundamentals: population growth well above the national average, significant infrastructure investment underway including the Cross River Rail and Brisbane Metro and the 2032 Olympics providing a demand anchor and investor confidence that few other Australian cities can currently match.
That said, borrowers should consider what would happen if rates continue to rise. They should also be cautious about stretching to the limits of their borrowing capacity. The urgency that characterised buyer behaviour over the past 2 years has largely dissipated.
The non-financial considerations of home ownership also deserve more weight than they typically receive. Security of tenure, stability of schooling for children, the freedom to modify a dwelling to suit your circumstances and proximity to family and community are all genuine contributors to wellbeing that a rent-versus-buy spreadsheet does not capture.
So, what can be done?
The dominant public debate remains focused on demand-side instruments: guarantees, grants and rate settings. These are not without benefit, but they address symptoms rather than causes.
The broader policy failure is the issue most commentary continues to downplay: Australia is not building enough homes. That is a structural problem with structural causes: planning systems that are fragmented and slow, a construction workforce that has not been developed at anything like the required scale and a political economy where the majority of voters are existing homeowners with a reasonable financial interest in supply remaining constrained.
This parliament has a genuine opportunity to shift this conversation toward the supply side. The policy levers are reasonably well understood. What matters more – but remains unclear – is whether they will actually be used.
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