Houses are too expensive to buy, but that’s not the problem

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Given how similar so many of these key benchmarks are across all three nations, it’s interesting to consider just how different our cultural mindset is when it comes to housing and homeownership.

For a home to be deemed affordable, it should generally take up no more than 30 per cent of a household’s income. But according to PropTrack’s 2023-24 Housing Affordability Report, as of right now, an Australian family with a median income of $112,000 can afford only 14 per cent of housing nationally.

For Victorians, that figure drops to just 12 per cent of homes sold in the last year being affordable, while in NSW, it’s worse at just 10 per cent.

In Australia, many of us still see renting as something of a stop-gap. It’s what we do after finishing school, before settling down. It’s a milestone many of us feel the pressure to reach before we start a family of our own.

But in Germany and Switzerland, renting is not seen as a failure at all; it’s simply how the system works.

One of the well-known benefits that makes the rental system infinitely less stressful for residents in Germany is their long lease options. Unlike Australia, where the average tenancy agreement is 12 months, in Germany, an average tenancy agreement can be for anywhere between two years and two decades.

Another key difference is who invests in property. In Australia, the vast majority of private residences are owned by individual property investors. Because of this, people who rent are ultimately at the mercy of their landlord.

In Europe, however, it’s far more common for companies and corporations to invest in long-term build-to-rent schemes. This alone speaks to one of the main issues that has plagued Australia’s growing affordable housing crisis for years – the policies we do have, and the policies we don’t.

Add to this the never-ending confusion around what is a state government issue and what is a federal issue, and you’ve got the big old mess we’re drowning in today. For one example, take this: The Australian Bureau of Statistics found on census night in 2021 that more than 1 million homes across Australia were empty. Of the 10.8 million homes counted, that’s 9.6 per cent of them sitting empty.

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In Germany, where there are much clearer legislated protections for renters, and policies to support commercial investment in affordable housing, the rate of empty houses was just 4.3 per cent at the time of their census in 2022. Switzerland fared even better in their most recent census in June, where just 1.08 per cent of properties were vacant – or 51,974 homes.

In their paper “Australia’s Housing Crisis: How did we get here and where to now?” experts from the University of Queensland succinctly write: “On one hand, we have disinvested in social housing and other forms of housing that are affordable. And on the other, there has been a lot done as the policy level to ensure housing is a commodity to be speculated. Not simply a means for people to live, housing is a vehicle through which to become wealthy.”

But here’s the thing. Homeownership is just one of many paths to financial security. With strong policies to ensure renters are better protected, the opportunity to still live fulfilling lives is very much on the table.

And with that comes the opportunity to invest in different ways. Just because property was the money story of your parents or grandparents doesn’t mean it has to be yours, even if you grew up thinking that it did.

Victoria Devine is an award-winning retired financial adviser, bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. Victoria is also founder and co-director of Zella Money.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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