The Stats Guy: How expensive do you want housing to be?
Who wins when house prices are on the rise and who loses when they aren’t?
For decades Australia has cheered rising house prices as a sign that things are going well.
If your home was worth more this year than last, life felt a bit easier.
Politicians celebrated, homeowners smiled, and banks (who hardly do anything besides handing out mortgages) quietly tallied record profits.
We were introduced to the concept of the wealth effect – allegedly we spend more money simply because we feel richer when our house goes up in value (never mind whether or not our disposable income actually changed).
But after 30 years of almost uninterrupted price growth, Australians are beginning to ask – Is it actually good for us when house prices rise?
The answer depends on who you are: In housing, there are always winners and losers.
The case for higher house prices
Rising prices make most Australians feel wealthier. About two-thirds of households own their homes, either outright or with a mortgage, so for them a price rise is a tax-free wealth increase.
John Howard famously quipped that he had never met a voter who complained about their house going up in value. Homeowners who feel richer borrow more, renovate more, and spend more at the local café – which is why so many parts of the economy quietly prefer house prices to keep climbing.
When the value of bricks and mortar rises, countless winners are created as my (certainly incomplete) list of stakeholders who prefer higher house prices shows:
• Homeowners and property investors – their assets grow in value.
• Banks and mortgage lenders – bigger loans mean longer mortgages and higher interest revenue.
• Mortgage brokers – earn larger commissions on higher loan values.
• Real estate agents – commissions rise with sale prices.
• State governments – collect more stamp duty and land tax.
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• Federal government – benefits from larger capital-gains-tax receipts.
• Superannuation funds and SMSFs – higher property valuations boost returns.
• Tradies, architects, and builders – wealthier homeowners spend more on renovations and construction professionals can increase their margins.
• Hardware and homewares retailers – benefit from the “wealth effect”.
• Property photographers, stylists, and marketing firms – higher values justify higher fees.
• Financial planners and wealth managers – more clients seek advice on managing newfound equity.
• Luxury-goods retailers and private schools – can be winners but you will see this item pop up in the loser list, too: rising household wealth drives consumption.
• Local councils – higher valuations lift rate revenue.
• The Bank of Mum and Dad – can use rising equity to fund their children’s deposits and thereby create a relative competitive advantage over family units that don’t have access to a Bank of Mum and Dad.
• Media outlets covering property – higher prices drive more traffic and advertising revenue.
• Home-security and insurance firms – pricier assets are more likely to be insured.
• Divorce lawyers and estate planners – larger marital or inheritance assets increase business.
• Self-storage providers – it’s simply cheaper to rent external storage space than to fork out money for a larger garage or an extrabedroom.
• Foreign property owners – ever higher house prices make for juicy investment returns.
• Politicians in government – rising prices make voters feel prosperous.
Wow, that list is long! Is it settled? Are ever higher house prices the way to go?
The case for lower house prices
There is another side to the story and it’s gaining strength every year. High house prices create a lot of pain in the wider system and the argument for lower house prices can be made strongly, too.
For would-be buyers and renters, high prices feel less like prosperity and more like punishment. Many young Australians face million-dollar mortgages just to live near their work.
Key workers (that’s our teachers, nurses, and police officers) are priced out of their communities. Families delay having children or settle permanently for renting.
When housing eats up half a household’s income, less is spent on education, health, or small business investment. That slows productivity, innovation, and ultimately wages.
Socially, high housing costs worsen inequality. They drive family stress, mental-health challenges, and even higher demand for child-protection services.
In the end, entire communities pay the price for expensive housing. So, here is my (also incomplete) list of stakeholders who prefer lower house prices:
• First-home buyers – easier entry into the market.
• Renters – cheaper housing usually creates downward pressure on rents.
• Essential workers – improved ability to live near their jobs.
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• Employers – it’s easier to recruit when staff can afford housing.
• Younger generations (for now that’s Millennials and Gen Z) – reduced generational inequality.
• Federal and state governments – lower demand for rent assistance, social housing, and lots of services that are linked to higher poverty.
• Charities and housing NGOs – fewer clients facing housing stress.
• Foster-care and mental-health services – lower house prices are linked to reduced family breakdown and distress. Cheaper housing would keep thousands of the most disadvantaged kids out of the state care system.
• Affordable-housing developers – lower land costs enable more projects.
• Central business districts (CBDs) – revitalised by people able to live closer to work.
• RBA and regulators – lower systemic financial risk from household debt.
• Environmental and planning bodies – less sprawl pressure, more sustainable design.
• Universities and student renters – improved housing affordability.
• Small businesses – households free up cash for local spending.
• Insurance firms – replacing housing after a flood or fire is outrageously expensive to begin with; if prices are unnecessarily high, replacement is even more expensive.
• The stock market – less wealth tied in property means more money ends up flowing into our dramatically under-capitalised Australian stock market.
• Public-health systems – fewer stress-related presentations.
• Luxury-goods retailers and private schools – you saw this item already on the winner list but these areas might also suffer from high house prices: consumers have less disposable income to spend on luxury-goods or very high tuitions (they might instead spend one level down – Catholic school education at lower fees than private school, for example).
• Local pubs and cafés – more discretionary spending power.
• Non-homeowning divorcees – fewer financial hurdles in settlements.
• The middle class – future generations inherit a fairer, more stable housing system rather than a system increasingly dividing the nation into two very distinct classes of asset-rich and asset-poor Australians.
In other words, a cheaper housing market benefits the people and sectors that have been losing ground for the last 20 years.
The national choice we keep dodging
Whether prices rise or fall isn’t an act of God, it’s the result of political choices. Our governments decide how much land can be built on, how much migration to allow, how property is taxed, and how easy it is to borrow.
For decades we’ve chosen, consciously or not, to favour existing property owners. Every grant, every tax concession, every zoning restriction tilts the system toward higher prices. It worked politically because most voters were homeowners.
But the generational maths is changing. Younger Australians (who are more likely to rent) are becoming a bigger political force with every election. The next decade may be the first time we openly debate whether a housing system built on ever-rising prices still serves the national interest.
What kind of country do we want?
A future of rising house prices offers comfort for today’s owners but locks out tomorrow’s workers.
A future of stable or falling prices might be uncomfortable for asset-holders in the short term but would arguably make Australia fairer, more mobile, and more productive in the long run.
The real question isn’t whether house prices will keep rising – it’s whether we want them to.
As Australians we must have a very honest discussion about the kind of country we choose to build.
Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His podcast, Demographics Decoded, explores the world through the demographic lens. Follow Simon on Twitter (X), Facebook, or LinkedIn.
