Australia's Housing Obsession: A Nation's Economic Soul at Stake

Conor's Corner

"Just look at these alarming global stats on Aussie property household debt to income is sitting at a jaw-dropping 185%, while the US sits at 98%. We’re leading the world in all the wrong affordability metrics.

Bubble? Absolutely.

But the real question is, will it burst or just slowly deflate?"

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Australia's deepening fixation on housing has transformed its economy, diverting capital from productive sectors and inflating property values to unprecedented levels. As of March 2025, the nation's housing stock reached a staggering $11.3 trillion, with the average home priced at $1 million, positioning Australia's housing market as one of the most overvalued globally relative to its GDP 

This surge is underpinned by escalating mortgage debt, with Australian households bearing some of the highest debt-to-income ratios worldwide. Banks have shifted their focus dramatically; in 1990, nearly two-thirds of lending supported businesses, but today, that proportion favors mortgages, sidelining sectors that drive innovation and productivity

Policy responses from major political parties have further fueled the housing market. Labor's initiatives, such as enabling first-home buyers to purchase with a 5% deposit backed by government guarantees, and disregarding student debts in mortgage assessments, effectively promote subprime lending practices. The Coalition's proposals, including allowing superannuation access for home deposits and offering tax-deductible mortgages for new homes, similarly inflate borrowing capacities 

These strategies, while aimed at increasing homeownership, risk exacerbating debt levels and diverting essential capital from sectors vital for sustainable economic growth. As Leith van Onselen of MacroBusiness asserts, Australia's relentless pursuit of housing wealth has come at the expense of its economic vitality, effectively selling its soul for a housing bubble .​MacroBusiness+5MacroBusiness+5MacroBusiness+