Australia's retirement income system presumes homeownership is achieved before retirement — an assumption increasingly out of step with reality, according to UNSW vice-chancellor's professor and chief societal economist Richard Holden.
Those who rent long-term will need substantially larger superannuation balances than current settings anticipate or face real strain relying on the age pension alone, he said on a recent episode of The Business Of podcast.
Holden also linked reduced prospects of homeownership to broader disengagement, suggesting people who feel locked out of building wealth may pull back from investing in themselves or their communities.
His recommended offset for those without inherited wealth is investment in transferable skills and, where suited, entrepreneurial ventures — alongside continued saving, despite less favourable tax treatment than in the past.
The underlying driver is decades of house prices outpacing incomes, a shift Holden traces back to financial deregulation from the mid-1980s that expanded how much households could borrow.
"House prices have grown a lot over the last 30-odd years, or 40 years, and incomes haven't grown nearly as much," he said.
The result: Sydney now ranks as the second-most expensive housing market in the world relative to local incomes, behind only Hong Kong. Melbourne sits fourth and Adelaide ninth on the same measure.
The squeeze is severe enough that even high earners are effectively priced out — Holden noted someone earning above $190,000 attempting to buy Sydney's median-priced house on a full-income mortgage still wouldn't qualify.
"You wouldn't be able to afford it, and no one would give you [a loan]," he said.
That squeeze is already reshaping who owns property in Sydney. KPMG analysis shows the city's homeownership rate slumped to 59.9% over the past year — its lowest level in roughly 70 years — as renter households climbed 11.8% since 2021, now accounting for almost two in five Sydney households.
Even so, the market has cooled without easing the pressure. Cotality's Home Value Index fell 0.9% in August — a fifth straight monthly decline, now 3.6% below the March 2026 peak — with Sydney down 1.4% and 7.1% below its February peak.
Holden cautioned against directly comparing younger Australians' financial position to that of their parents at the same age, noting that education, marriage, and household formation now typically happen later in life. He said this delay, combined with genuinely higher housing costs, compounds how behind younger generations can feel.
"[T]hat double whammy makes people understandably feel how they do," he said.
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