In a November 2025 report, Cotality state some pretty depressing numbers for aspiring young home owners – using median Australian values.
The reported housing to Australian household income ratio of 8.2 is even worse when you consider housing in terms of the more meaningful disposable household income. This is the household income after deductions for tax, Medicare and existing loan payments.
There was a period in the late 1990s when it would take 9 or 10 years of annual disposable income to buy the average Australian dwelling. On average, it now takes 16-17 times disposable income to buy a residence.
It is not just homebuyers feeling the squeeze. Renters are also in pain because the high cost of housing means that property investors are asking for a fair return on their investment.
The median household required a record 33.4 per cent of its income for rent, which was well above the average of the past two decades. – Jason Dasey – ABC News
The chart below shows the effect on house prices after a series of Australian Government initiatives that have just seemed to add to the housing unaffordability problem in Australia. The dwelling prices have been accelerating away from household income since 1990.
It’s just Unfair
Matt Grundoff from The Australia Institute outlines the absurdity of the current system using the example of a highly paid executive who just has made a $400 000 profit on an investment property. Because of the Capital Gain discount, the profit will be taxed at 50% of the executive’s marginal rate – 50% of 47% = 23.5%. Contrast this with a full-time retail worker on the minimum wage (~$50 000) who will pay 32% tax on any extra shifts. Why should the retail worker pay tax at a greater rate than the executive?
The incentives are driving high net worth individuals into the property investing market. Currently, 60% of the Capital Gains discount goes to the top 1% of earners – on salaries of more than $362 900!
Today, the capital gains tax discount appears in the federal budget as a tax expenditure worth more than $20 billion a year. – Luke Hopewell – Switzer
Something is in the wind
On fairness grounds, something must be done to tackle this dire current housing situation for the young. Slack Investor has never been in the position where a massive 45% of his income was required to service a mortgage. Likewise, in his younger days, he has never had to provide 33.4% of household income for rent. It is no wonder that Roy Morgan found that 23.9% of mortgage holders were ‘At Risk’ of ‘mortgage stress’ in January 2026.
There are enough balloons going up to signal that the Australian Government is going to look at the Capital Gains discount in the 2026 Budget. In the way of compromise, they will probably just reduce percentage amount of the discount to owners of multiple properties. This is a delicate matter, as a more drastic change might spook any property investors out of the market – and worsen the already tight rental scene.
