The latest figures from the Bureau of Statistics today reveal that the size of the average home loan over just the past 5 years has increased by more than $198,000 in Western Australia, South Australia, Queensland and New South Wales.

Everyone knows Australian house prices are high and putting home ownership out of reach for many new home buyers. These most recent mortgage figures only serve to remind people just how expensive it is to buy a home.

While often the media commentary is about Sydney house prices, the home loan figures show all states are affected. For example, the average new home loan in South Australia in just five years has gone from $372,000 to $580,000 – a 56% increase at a time when the average full-time earnings in South Australia have increased only around 18%.

But while the current situation is dire, if the pace of the past 20 years continues, owning a home will not so much be the Australian dream, but a ludicrous fantasy unavailable to everyone except to the very richest.

One clear way to demonstrate just how unaffordable housing is now compared to the past is to compare dwelling prices with average earnings. If average earnings went up at the same pace as house prices, then housing now would be just as affordable as it was before.

The problem, as you can see from the first graph above, is that is not the case.

In March 2002, the cost of an average house in Sydney was 8.3 times the average annual full-time wage. That of course is expensive, but alas now it looks incredibly cheap. In June 2024, the price of that average dwelling in Sydney is now equivalent 14.4 years earning the average wage in New South Wales.

In dollar terms, the difference is quite shocking. The current average dwelling price in Sydney is $1.45m, but if the price was the same 8.3 times as it was in 2002 that average price would be just $835,000.

In effect, people in Sydney need to pay $615,000 more in today’s dollars for a home than did Sydneysiders 20 years ago.

A similar story is told across all states, but with some surprising (unless perhaps you live there) results. The housing affordability in Hobart has fallen quicker than all other states – the average house in Hobart has gone from being 2.8 times the annual average full-time earnings in Tasmania to 7.6 times.

The average house price in Hobart is currently $676,000, but if it was still just 2.8 times the annual full-time wage in Tasmania it would be just $249,000.

So while Hobart might seem an inexpensive place to buy a house compared to the cost of houses in Sydney and Melbourne and other capital cities, because the wage in Tasmania is lower than in other states, buying a house and living in Hobart is becoming harder than is the case in other capital cities.

While this is bad enough, things get very scary when we project forward another 20 years.

Sydney is clearly the worst place at the moment to buy a house as is well known. However, on recent trends all cities will catch up and pass where Sydney is now. Sydney itself will still be worse than the other capital cities if present trends continue. If the current trend of the past 20 years continues, the average price of a house in Sydney in 2044 would be 23.7 times the average salary – or equivalent in today’s dollars to $2.4m.

Note this is not a prediction. Housing prices are volatile and past trends are not a good guide to the future.

We would hope that well before 20 years have passed governments will have acted to slow the sort of the pace that we have seen over the previous 20 years. Moves to limit negative gearing and the capital gains tax breaks on investment properties which the Parliamentary Budget Office estimates will cost $13.5bn this year need to be a priority, as well as massively increasing public housing

As the figures show, the current trends cannot continue without effectively destroying housing affordability for the next generation.