31 January 2025 · Australian News · Uncategorized
Rising Costs, Diminishing Returns, and the Burden of Homeownership
Australia’s housing market has long been a focal point of economic discussion, but in recent years, the conversation has shifted from prosperity to crisis. The increasing gap between wages and property prices, coupled with the soaring costs of land and renovations, has made both homeownership and home maintenance financially prohibitive for many Australians. As costs escalate, homeowners face a stark reality, renovating is no longer an investment in long-term value but, for many, an unavoidable and costly necessity.
The fundamental issue is affordability. The house price-to-income ratio has nearly doubled since 2002, with the median Australian home now costing close to nine times the average household income. This imbalance is exacerbated by a 7.6% increase in median land prices, reaching $366,510 per lot in the last year alone. The result is an economic environment where fewer Australians can enter the housing market, and those who do often lack the financial flexibility to undertake necessary structural improvements.
For existing homeowners, the assumption that renovations serve as a viable alternative to relocation is increasingly being challenged by the rising cost of materials and labor. A full home renovation now ranges between $20,000 and $500,000, with even minor upgrades commanding prices that would have been unthinkable a decade ago. The cost of kitchen renovations ranges from $10,000 to $45,000, while bathroom remodels typically start at $10,000 and can easily exceed $35,000. Structural repairs, such as house restumping, which is critical for ensuring a home’s foundational integrity, now cost between $10,000 and $30,000, a figure that has risen substantially as supply chain pressures and labor shortages drive costs higher.
The consequence of this financial strain is that many homeowners are delaying or outright abandoning essential repairs, a situation that, in the long run, could diminish property values and lead to significant structural risks. Matt Adams of Southern Stumping and Underpinning has observed a growing number of clients struggling with this reality. “Many homeowners recognise the risks of delaying restumping, but they’re simply unable to absorb the cost,” he explains. “The problem is, structural deterioration doesn’t wait. What could be addressed for $15,000 today could escalate into a $40,000 issue in a few years.”
This financial pressure is not just affecting renovations, it’s forcing some Australians to abandon homeownership altogether. A young family in Adelaide recently had to sell their partially completed home, unable to complete construction due to rapidly rising costs. This case is indicative of a broader issue: homeowners who entered the market with the expectation of affordability are now facing financial constraints severe enough to force them out.
From a policy perspective, there is a growing need for government intervention to prevent homeownership from becoming an untenable financial burden. While there have been discussions around first-home buyer grants and tax incentives, there has been far less emphasis on assistance for existing homeowners struggling with necessary renovations. This raises a crucial question: if the government recognizes the importance of ensuring Australians can buy homes, why is there no comparable emphasis on ensuring they can afford to maintain them?
Furthermore, there is an economic argument to be made for targeted renovation subsidies. Allowing homes to fall into disrepair due to financial inaccessibility is counterproductive from a housing supply perspective. A deteriorating housing stock leads to greater long-term instability in the market, potentially forcing future governments to step in with far costlier housing solutions down the line.
The prevailing economic model suggests that homeownership should be an asset, not a liability, but as costs rise, that principle is being eroded. Instead of providing financial security, real estate is becoming a financial burden, where owning a home does not necessarily equate to being able to maintain it. If affordability continues on its current trajectory, Australia will see a shift in housing demographics: fewer young homeowners, an increase in deferred maintenance, and a growing financial divide between those who can afford to renovate and those who cannot. At some point, policymakers must acknowledge that the challenges facing Australian homeowners are not confined to market entry, but to long-term sustainability. Until then, many Australians will continue to face a grim reality: a home that costs a fortune to buy, a fortune to maintain, and, in many cases, a fortune to escape.
https://www.corelogic.com.au/news-research/reports/housing-affordability
https://www.aihw.gov.au/reports/australias-welfare/housing-affordability/