Is affordability a foolish utopia?

Affordability is consistently discussed in relation to both real estate and financial advice. But market forces are overpowering any policy measures designed to help the masses.

Australia is in a unique position. It barks the loudest of any nation about housing affordability yet remains one of the most unaffordable property markets on earth.

True, other markets are also highly unaffordable, such as Hong Kong, San Francisco and New York. But none of them appear as obsessed with making property affordable as we are.

The 2022 Demographia International Housing Affordability report used a cost versus income ratio to assess house prices for 92 major markets across Australia, Canada, China, Ireland, New Zealand, Singapore, the UK and the US. It found that Sydney, Melbourne, Adelaide, Brisbane and Perth are among the top 20 least affordable cities in the world.

Sydney is the second most unaffordable market in the world, according to the report, just behind Hong Kong.

Australia has had seven Prime Ministers across both major parties since 2007 and each one has promised to make housing more affordable. Whenever a new government is formed, fresh schemes are announced for first home buyers. Yet the affordability issue continues to deteriorate. Or so they say.

The market forces of supply and demand will always overpower the utopian belief that every Australian should own a home. At some point, someone will need to make the blindingly obvious statement that this ‘dream’ of home ownership will never materialise for some people. It’s simply not possible for every citizen to become a homeowner. This is a fact that many other developed nations have already accepted.

Then again, other countries do not have the perverse fascination with real estate as we do in Australia. We are a nation of property investors and pundits. Around two-thirds (66 per cent) of us own a home and one in five Aussies are property investors.

But making property, or anything for that matter, more affordable means reducing its price or increasing the means of the purchaser. The idea of making housing affordable seems an overly ambitious one. It has also failed. We need to accept that certain things will forever be out of reach for some people.

Which brings me to financial advice. Just like property, financial advice is a consistent target of the affordability mob. There have been countless reports, inquiries and discussions about making advice affordable.

If we consider this from a financial adviser’s perspective, affordable advice is what they are currently providing their clients. If it wasn’t, they wouldn’t be able to pay for it. This same argument can and should be applied to property – if it is still selling, then people can afford it.

Therefore, the argument isn’t really about affordability at all. It’s about discounting products and services below their market value. And I can’t see too many homeowners or financial advisers doing that.

James Mitchell is the head of content at Momentum Connect. He has more than a decade of experience writing about the finance industry, including mortgages, wealth and superannuation.

[Related: Has financial advice become a liability for brokerages?]