Blame Bob Menzies. With Treasury Secretary John Fraser warning of a housing ‘bubble’ and with prices at ‘crazy’ levels according to Reserve Bank Governor Glenn Stevens, and claims that housing is now ‘unaffordable’ to ordinary Australians, the proud Prime Ministerial housing legacy of R.G. Menzies is causing Treasurer Joe Hockey some pain. In his book The Menzies Era, John Howard repeatedly noted the significance of increased Australian home-ownership in Menzies’ political success. He re-shaped the nation by converting post-war Australia into an urban, middle-class, home-owning, mortgage-paying nation of asset-protecting petty capitalists who dutifully voted Liberal for 23 years to make sure their growing prosperity and stability was not disrupted by Labor’s pro-red, bank-nationalising socialists. This remarkable success, in converting our conventional home ownership rate of only around 50 per cent when he won office in 1949 to a world-leading 70 per cent owning our own home by the mid-1960s, is still being sustained, but at the older end of the age spectrum, and with many more apartments (popular with Asian buyers) replacing the traditional suburban block.

Menzies’ creation of what has become the Australian home ownership dream, is now so firmly fixed in our psyche that it has taken form as yet another entitlement – that every Australian should have the right to own his own home located where it is most convenient to him/her. Such expectations are on a different level from 60 or so years ago where the fibro two-bedroom, no appliances, no car-port outer-suburban ‘villas’ provided the stepping-stone to home-ownership for so many young Australians. So Treasurer Joe Hockey’s blunt, but nevertheless accurate advice that the way to afford a good house (particularly in the high-priced capital cities) is to get a well-paid job, was seen as another unfeeling attack on an entitlement. Yet even the Reserve Bank, with the Global Financial Crisis in mind, is warning banks against making housing loans that are beyond the capacity of borrowers to pay, so there is merit giving the same warning to potential borrowers. But what the ‘dreamers’ really want is government intervention – or, in some instances the removal of existing distortions – in order to restore housing ‘affordability’ to those young Australians currently being denied their ‘right’ to home ownership because of the high costs.

But the market-place reality, evidenced by sales volumes, is that homes are affordable, otherwise no-one would be buying them. It’s just that investors, not first home buyers, comprise the big increase in purchasers as demand surges, under the stimulus of record low interest rates (blame the Reserve Bank). So prices rise because there is no comparable increase in the supply either of newly-built homes or available existing houses, the number of which is also limited by tax and pension considerations that discourage many older owner-occupiers from selling. But one day these homes will become available; maybe that’s how this generation will get their house – by inheritance. For those priced out of the housing market, there may be a silver lining: a recent study demonstrated that it may now make good economic sense to rent rather than to buy. The prospects are for a further moderation in rent rises, following the record low of only 1.5 per cent, as more rental properties become available.

So despite all the talk of a high-priced housing bubble, investors are still piling into rental property purchases.

The Grattan Institute reckons unaffordable housing is an emerging social, economic and political dilemma for Australia, with home ownership not only falling for the under 35s, but also up to the 35-44s. This seems less likely to be the result simply of rising housing costs and more of lifestyle and employment choices; women delaying marriage, men remaining with their parents up to their 30s. If this really does represent the breakdown of the Menzies home-ownership legacy with Australians increasingly preferring not to take on the responsibility of substantial mortgage debt at the same time as they undertake increasingly flexible employment practices, Menzies’ hoped-for political benefits from home ownership may have run their course.