Australia’s population has not dramatically increased compared to the increase in housing costs. So there seems to be a supply and demand problem.

I have heard that in some towns where the population has not significantly increased, (or may be decreasing), divorce and separation drives up to 75% of the real estate market for housing. This is because after a divorce or separation, there is now a requirement for 2 houses instead of 1, and this increases demand over available supply, and the housing prices go up, with a demand for new housing, for no increase in population.

Also Australian’s want to live in houses and not in high-rise units it appears, (although new housing blocks are now so small, people might as well live in units). However roads are now some of the most expensive real estate in towns and cities, because roads take up so much room.

So each new subdivision requires new roads which take up more area, which means new subdivisions have to be located further away from the town or city centre, which means more dependency on cars, which means even more roads, which means more petrol consumption, which means more pollution etc.

I think Australians will have to stop getting divorced, and will have to go high-rise.

In a sense, home ownership is not "natural" for want of a better phrase. What I mean by that is this:

A recent ad I saw advertised a flat in Newtown (Sydney's inner west) for $380,000. The person who will buy that flat will not, in all likelihood, have a spare $380,000. They will have a fraction of that amount which will cover the "deposit". The rest will be covered by money which is not their own (the "loan"). This contributes to the inflated cost of housing because the buyer is not required to come up with the correct amount from their own hard-earned cash.

Logically, nobody should be allowed to buy a house or flat without being able to cover the total cost. After all, when you do your supermarket shopping do you give the cashier a deposit and then get someone else's money to cover the rest? No, if you suggested that the cashier would call the manager. However, you can buy groceries on credit (another way of saying "not your own money"). I wonder if that is inflating the price of food?

Housing is unaffordable because, unlike so many other things in life, it is not bought with up-front cash. And that is inflating the price because if you take commodities away from actual real dollars and peg them to potential dollars (loans) anything goes.

And the sad thing is the flat in Newtown I mentioned is a piece of garbage I wouldn't part with a fiver for. But it will sell, no doubt.

DavidJS has come close to the point, but not quite there. Governments have a dual interest in housing prices being as high as possible. One is obvious, that stamp duty and land tax rise with higher prices. What most people don't realise is that they profit greatly from borrowing. Just think; say you borrow $100,000 at 8%. The interest you pay, $8000 per annum, is not tax deductible. But for the person who collects the interest (bank, investor, it doesn'e matter), it is taxable. So the government collects something like $4000 per year for nothing. Great racket. In addition the person with the mortgage will have to work hard to be able to repay the mortgage out of after-tax dollars. Even better racket.

Yes you're right and when you see a house advertised the stamp duty is not even factored into it - unlike the GST on other products. So as well as being a racket it is false advertising.

Australia historically has had a high percentage of homeowners due partly to the fact that people can get access to finance without having much of their own ready cash (and instead get a loan based on their earning power and other factors). This may not be the case for much longer as house prices start to "globalise". In fact, they're doing that now.

So, I believe that the percentage of Sydney residents who own their own homes will start to match New York, Tokyo or Paris residents. As we race to the bottom with wages, so too will we see homeownership decline. I'd like to think I'm wrong but I'm not in an optimistic frame of mind.

Plerdsus,
I think there was something else missed, which is GST. A company can collect GST from a customer, but does not have to pay that money to the government for some weeks. In the mean time, they can invest that money and earn interest on it, and they earn money without having to sell anything, or produce anything.

But consider the following:-
1,000 divorces per week, requiring 2 set of accommodation instead of 1. About 30 – 40 % of those adults get remarried, but after a number of years, and overall there is a major demand for new accommodation, for no increase in population.

Possibly up to 1,000 separations per week from de facto relationships, and similar to divorces, it creates a major demand for new accommodation, for no increase in population.

The whole thing eventually pushes demand beyond supply.

Solicitors, real estate agents, and housing developers just love divorce and separation, but if anyone is paying rent or a mortgage, then they are paying for it.

The number of single person households is steadily climbing, and I have seen one estimate that by the year 2050, the vast majority of adults in Australia will be living in single person households. Solicitors, real estate agents, and housing developers will love that also, but there wont be much environment left outside the front door.

Negative gearing makes buying investment properties a good tax dodge for those who can afford it. The extra buyers in the market would help push up the price somewhat.

If we had a network of high speed rail(mag-lev) connecting our capitals with regional centres and rural infrastructure to deliver power, communications and water to those areas then maybe people would tend to decentralise and move inland, taking pressure off the cities.