The Australian Dream has never been more expensive

A couple I know recently celebrated buying their first home in Brisbane. They are in their early thirties, both work full time, and they are good with money. The deposit took seven years. Seven years of foregone holidays, share houses, and watching the target move further away every time they got close. When they finally crossed the line, the reaction from friends and family was less congratulations and more relief, as if they had narrowly avoided something.

That reaction tells you more about Australian housing than any chart.

But charts matter too. So let us look at one.

If you take Australia's national median detached house price, assume an 80 per cent loan, a 30-year principal and interest mortgage at the prevailing standard variable rate, and measure the annual repayment against the after-tax disposable income of a couple aged 25 to 34, the number you get for late 2024 is somewhere between 45 and 47 per cent of household income. In other words, nearly half of what a young working couple earns is now going to the bank before they have paid for groceries, petrol, or childcare.

For context, the long-run average of that ratio since 1980 is around 36 per cent. We are currently running ten percentage points above it, and the gap has been widening continuously since 2019 as the RBA has been lifting rates.

The standard counterpoint is 1989, when the standard variable rate hit 17 per cent and mortgage repayments briefly cracked 40 per cent of a young couple's income. It is true that things were genuinely bad for new buyers back then. But that episode lasted roughly 18 months before rates collapsed. By the mid-1990s, a couple in their late twenties could buy into the market for around 22 per cent of their income. The current situation is structurally different. We are not dealing with a temporary rate spike on fairly-priced assets. The national median house price is now over one million dollars in the combined capitals, and it crossed $1,028,000 on a national basis in the March quarter of 2026. That number would have seemed fanciful ten years ago.

The COVID window deserves a moment of attention. In early 2021, with the cash rate at 0.10 per cent and the standard variable rate around 2.6 per cent, the repayment ratio for a young couple dropped to roughly 24 per cent. The lowest reading in the entire 45-year series, and the only period in living memory where entry-level home ownership was genuinely affordable for a median-income couple in their late twenties. That window lasted less than eighteen months. The RBA then delivered the sharpest tightening cycle in a generation, and prices, after a brief correction, resumed climbing. The gift was given and taken back, with interest.

The two rate cuts delivered in early 2025 — February and May, totalling 50 basis points — have done less than many hoped. On a $1 million house they save roughly $3,500 a year in repayments. That is not nothing, but against a backdrop of house prices that have risen by over $200,000 in three years, it is a rounding error. The ratio barely moved.

What comes next is the uncomfortable part. ASX cash rate futures as of 5 March 2026 are not pricing further relief. They are pricing hikes, with the implied cash rate rising from 3.85 per cent today back toward 4.35 per cent by late this year. If that path materialises, and prices continue to drift higher on the back of structural undersupply, the repayment ratio for a young couple will approach 47 per cent by the end of 2026. The brief 2025 softening looks less like the beginning of an easing cycle and more like a pause.

The supply picture offers little comfort. The National Housing Supply and Affordability Council projects around 183,000 new dwellings per year through to 2027, comfortably short of the 240,000 needed to meet the government's own Housing Accord target. Construction costs remain elevated, trades remain scarce, and planning approval timelines in most capital cities would test the patience of a saint. In the meantime, net overseas migration, while moderating from its post-COVID peak, continues to run well above the historical average.

None of this analysis is particularly new. Australians have understood the housing affordability problem in the abstract for at least two decades. What is new is the intergenerational permanence of it. Someone born in 1960 who bought their first home in 1990 — at what felt like a terrible time to buy, with rates at 17 per cent and recession looming — has seen the real value of that asset more than triple over their lifetime. Someone born in 1995 who is trying to enter the market today is paying 46 per cent of household income for a mortgage on a national median-priced house, in a rate environment that the futures market thinks is about to get worse, not better.

Demand-side policy responses, stamp duty concessions, shared equity schemes, first home buyer grants, have a long track record of inflating the very prices they are meant to make accessible. The research on this goes back at least to Australia's own experience with the First Home Owners Grant, and was revisited extensively during the UK's Help to Buy debate. Subsidising the buyer does not build a single additional dwelling.

The structural fix is not complicated to describe. Build more homes, in the right places, at lower cost, with faster approvals. The political difficulty of doing it at the required scale is the only reason it has not happened. In the meantime, a generation of young Australians is being asked to pay a price for that political difficulty that their parents never had to pay.

The couple in Brisbane are doing fine. They are also, by any reasonable historical measure, about fifteen years worse off than their parents were at the same age in the same city. That is not a market anomaly. It is a policy choice that has compounded quietly for two decades. The chart just makes it visible.