Federal Housing Minister Clare O’Neil has defended the need for slower house price growth, saying decades of rising property values have created an unsustainable housing market that is increasingly shutting younger Australians out of homeownership.
Speaking to Rafael Epstein on ABC Radio Melbourne, Ms O’Neil said the recent softening in property prices needed to be considered against the substantial increases recorded over the past generation, rather than viewed solely through short-term market movements.
Her comments follow the latest Domain House Price Report, which revealed house prices fell across every Australian capital city during the September quarter for the first time in 15 years.
Combined capital city house prices declined 4.7 per cent over the quarter to $1,226,566, representing a fall of $59,870 and the steepest quarterly decline on record, according to Domain.
Ms O’Neil said the longer-term trajectory of Australian property prices had created significant affordability challenges, particularly for younger and lower-income households.
“What is really clear to me as Housing Minister of our country is that house-price growth over the last generation is unsustainable for the nation,” she said.
“There’s a great deal of media interest in looking at what happens month to month, year to year. My job is to see the big picture, and the big picture is that over a 25-year period in our country house prices have grown by 400 per cent.”
She said the consequences of those increases were evident in declining homeownership rates, particularly among younger Australians who were finding it increasingly difficult to enter the market.
When pressed on whether she wanted the situation to change, Ms O’Neil confirmed that she wanted house price growth to slow, while emphasising that the recent downturn followed years of substantial capital gains.
“You talked about what’s going on in the market today. Let me just remind you that what’s happening in that softening at the moment is part of a picture where house prices have grown 50 per cent just since the beginning of COVID,” she said.
The Minister’s comments come as Australian real estate agents navigate a more challenging selling environment, with higher borrowing costs, weaker buyer confidence and greater price sensitivity affecting transactions across many markets.
While declining property values may improve affordability for some prospective purchasers, the broader challenge remains balancing access to homeownership with the financial interests of existing homeowners.
Ms O’Neil acknowledged that affordability pressures remained particularly acute in areas traditionally popular with first-home buyers.
During the interview, Epstein pointed to Melbourne’s outer suburbs, including Pakenham and Melton, where he said prices had increased approximately 25 per cent over five years, making entry into the market difficult despite the broader downturn.
Ms O’Neil conceded that the housing crisis remained unresolved and said governments had failed to adequately address supply constraints over several decades.
“We’ve got a 40-year-old crisis that’s been built up in part because Commonwealth and state governments have dropped the ball, stepped back and not done enough, and that is changing,” she said.
“One of the reasons we have such chronic issues with housing is for 40 years we haven’t been building enough homes; we have a chronic housing shortage which is most severe at the affordable end of the market.”
She pointed to a recently announced agreement between the Commonwealth and Victorian governments to support new housing development, including homes intended for first-home buyers.
Under the arrangement described by Ms O’Neil, the Federal Government would provide funding for essential infrastructure such as water and sewerage services to help unlock residential development, with Victoria expected to support additional housing supply.
Ms O’Neil said greater government involvement was necessary to address affordability, arguing that housing shortages could not be resolved without a more active role from governments.
However, she faced questions about whether government intervention was doing enough to address the underlying costs of residential construction.
Epstein raised concerns attributed to the Property Council that building homes remained prohibitively expensive and that government policies were not adequately addressing the barriers faced by private developers.
Ms O’Neil acknowledged the complexity of the problem, pointing to multiple structural issues affecting housing delivery.
“We are actually seeing the effects of about 20 broken systems: a planning system, a tax system, a Construction Code that doesn’t function correctly,” she said.
“All of these problems need to get fixed and I want your viewers to know that governments are actually engaging with this and fixing them one by one.”
The Minister also defended the government’s record on housing construction, claiming that approximately 250,000 homes were currently being built across Australia.
She pointed to Victoria’s housing construction activity as evidence that increased supply could contribute to more sustainable price and rental growth, although she acknowledged that significantly more work was required.
“Do we have a lot more work to do? Hell, yes, we do, of course we do,” she said.