close
close
An American exposes the four major problems with the Australian housing market: “It seems like paradise, but there is a dark side”

An American exposes the four major problems with the Australian housing market: “It seems like paradise, but there is a dark side”

A popular YouTube documentary channel has revealed why Australia’s housing market is out of control and offered solutions to fix it.

In a video shared last month ‘Why Living in Australia is Impossible’, the team of American YouTubers known as 2&20 examined the key causes of the country’s housing affordability crisis.

Immigration, bureaucratic procedures, tax incentives and declining investments were some of the many reasons attributed to the exorbitant prices.

“The country seems like a paradise, but if you want to live here, it’s easier said than done. This is the dark side of Australia,” says the voiceover in the video.

‘Australia has the world’s 13th largest economy, beautiful beaches, access to world-class education, universal healthcare and much more.

‘At the same time, Australian house prices and rents have reached record levels, making the country one of the most unaffordable places in the world.’

Housing prices outpace incomes

“To buy a median-priced home in Melbourne, a family needs to earn at least $170,000 a year. In Sydney, that figure rises to $260,000 a year,” the video says.

An American exposes the four major problems with the Australian housing market: “It seems like paradise, but there is a dark side”

“It’s clear that home ownership is out of reach for most Australians,” says the video Why living in Australia is impossible

Teams 2 and 20 compared this to what they claimed was the median household income in both cities of $100,000.

“It’s clear that homeownership is out of reach for most Australians,” the video says.

Now, some might argue that this is just a Sydney or Melbourne problem, but that is not the case.

‘Since 2020, house prices in Brisbane, Adelaide and Perth have increased by more than 50 per cent, while wages have only grown by 12 per cent.

‘For many Australians, especially younger ones, home ownership is becoming less attainable.’

To illustrate the “madness” of the Australian property market, they used the example of a house in Sydney that was sold without a bathroom, kitchen or electricity for $3.5 million.

Immigration

The video states: “The first culprit that many point to is immigration.”

‘Between 2022 and 2023, Australia welcomed almost 740,000 people – that’s more migrants than in any other year in Australia’s modern history and 200,000 more than pre-Covid levels.

‘The impact of this huge increase in immigration is simple: higher demand for the same supply of housing equals higher prices.’

The team said the majority of migrants in Australia are temporary visa holders and 70 percent of them are renters.

‘The impact hits hard in the suburbs with the largest migrant population.

‘For example, Melbourne’s south-east and Sydney’s inner south-west saw rents rise by 18 per cent in the past year.’

Team 2 and 20 revealed how immigration impacts housing prices.

“The argument that immigrants are a major contributor to rising housing prices is quite weak,” they said.

The video states that while immigration has continued to grow with the population, housing starts (new construction) have declined.

‘In 2023, 170,000 homes were completed, the lowest figure in a decade.’

“There is hardly any country on Earth that has such a favorable tax regime for real estate investors,” said the team at 2 and 20.

Tax incentives

The 2 and 20 team believes that negative leverage has had a detrimental impact on the Australian property market.

The video examined the introduction of negative gearing in the 1930s and how the government attempted to change the rules in the 1980s, placing restrictions on the deductions that can be claimed.

“But this generated a significant backlash and negative leverage returned to its original form,” the documentary team said.

‘There is hardly any country on Earth that has such a favourable tax regime for real estate investors.

‘The argument against it is that it materially benefits landowners and older Australians and, frankly, the argument is quite strong.’

Decreasing productivity and investment

The video claims that this is another factor contributing to the housing crisis.

Team 2 and 20 claimed that no one bothers to invest in anything else because Australia has made it very good to invest in non-productive assets, including real estate.

“Australia’s productivity growth has been slowing in recent decades,” they said.

‘The average annual growth in labour productivity between 2010 and 2020 was only 1.1%, significantly lower than in previous decades.’

Team 2 and 20 said that most migrants in Australia are temporary visa holders and 70 percent of them are tenants.

Team 2 and 20 said that most migrants in Australia are temporary visa holders and 70 percent of them are tenants.

Team 2 and 20 revealed that in 2022 Australia only spent 1.7 percent of GDP on Research and Development compared to other major countries.

They described it as “terrible.”

‘As a result, nominal GDP per capita and real GDP per capita have not increased over the past 10 years.’

They said that even when comparing corporate and income taxes, it is clear that Australia believes land ownership is the most important investment activity.

The solutions

The video concludes by offering solutions to Australia’s housing crisis.

  • Reducing income taxes for Australian workers
  • Eliminate negative leverage
  • Lower incentives for capital gains
  • Eliminate bureaucracy to encourage real estate development
  • Educated Australians who can keep politicians honest