Stagnating wages deprive young people of home ownership, report finds
Low wage growth between 2012 and 2022 has prevented young people from breaking into the property market, a report has found.
A report by policy think tank Per Capita found that low wage growth between 2012 and 2022 cost the average income earner $54,000, leaving home ownership out of reach for many young workers as house prices climbed.
“In late 2022, almost two-thirds of young people told Per Capita’s Australian Housing Monitor that the only way they would ever be able to buy a home was if they got a large inheritance,” Emma Dawson, the report’s lead author, said.
“This is a damning indictment of the loss of social mobility in a country long considered the land of the fair go.
“Supply side measures to build more homes are critical but allowing people to get ahead with wage increases is a critical factor in affordability.”
Across the Australian economy, workers lost $60 billion a year in wages between 2012 and 2022 due to stalling wage growth, Per Capita found. At the same time, the wages share of national income declined by 3.6 percentage points while the profit share rose by 6.9 percentage points, underscoring a shift from wage income to profit income in Australia’s economy.
A significant factor behind the low wage growth between 2012 and 2022 was the 2005 introduction of WorkChoices legislation which dampened workers’ bargaining power and reined in unions to the benefit of corporations, the report said.
Between 2003 and 2024, wages doubled while house prices increased by nearly three times. Real wages grew by 0.2 per cent annually between 2012 and 2022, well below the historical average of 1.5 per cent per annum between 1991 and 2011, the report said.
The stagnation of wages between 2012 and 2022 cost the average income earner $54,000, Per Capita found.
Based on the typical first home buyer, according to Australia’s major banks – a couple in their mid-30s borrowing just under $500,000 – the $108,000 lost to the average working couple amounted to an average first-home deposit.
“Critically, this means that the 34-year-old first home buying couple would have been able to save that 20% deposit themselves, with no need for a gift or inheritance … if only wage growth had not been so badly suppressed in the first decade of their working lives,” Per Capita said.
“What is needed for Australians without family or inherited wealth to more comfortably afford their first home is for dwelling prices to come back into line with wages.”
A report by the Grattan Institute found that in the 1990s it took six years for the average household to save a 20 per cent deposit for a typical dwelling. Now, it would take over 12 years.
Comparing home ownership rates between generations, Per Capita found that only 36 per cent of late Millennials – aged between 25 and 29 – were home owners during the 2021 census. In contrast, 50 per cent of those aged between 25 and 29 were home owners in 1971.
Per Capita projected that only two-thirds of Millennials would have the prospect of becoming home owners in retirement, compared to roughly 80 per cent of Baby Boomers.
Such low ownership rates would increase poverty rates and exert pressure on the retirement income and social housing systems, the report warned.
Research from the Grattan Institute found that two in three retirees who rent in the private market live in poverty, and that Commonwealth rent assistance is far too low to support pensioners who rent.
Per Capita said that, in order to enable Australians without inherited wealth to afford a home of their own, the issue of wage growth must be addressed.
“If home prices are not to crash, destroying the financial security of millions of people, then an important and overlooked part of the answer is improving wage growth,” the report said.
“This is a policy problem, and it has a policy solution.”
