Australian Land Value Skyrockets, Squeezing Young Homebuyers Out of the Dream
Land has become the cornerstone of Australian wealth, with its value soaring dramatically over the past 25 years, leaving younger generations struggling to enter the property market. According to recent data from the Bureau of Statistics, total Australian household wealth increased by $1,751 billion in 2025, and a staggering 49% of that growth, equivalent to $859.8 billion, came solely from land appreciation.
The Shift from Homes to Land as Primary Asset
Greg Jericho, a Guardian columnist and chief economist at the Australia Institute, notes that while the great Australian dream traditionally centred on homeownership, it is now the land beneath those homes that holds real value. Historically, in the 1980s, the value of land held by households was about 1.3 times that of dwellings, but today, it has ballooned to three times that value.
This shift is not just a minor trend; land assets have increased by 832% over the past 25 years, outpacing other investments like superannuation and bank deposits. Land now constitutes 42% of all assets held by Australian households, up from 30% in 1988, highlighting its dominant role in wealth accumulation.
Capital Gains Tax Discount Fuels Wealth Inequality
The surge in land value is closely tied to policy decisions, particularly the 50% discount on capital gains tax (CGT) introduced in 1999. This discount primarily benefits real estate investors who buy and sell properties for profit, rather than individuals purchasing homes to live in. As a result, housing has increasingly become an investment vehicle, prioritising asset growth over providing affordable shelter.
Back in the 1990s, the value of land held by households was about 1.5 times annual household income; now, it has skyrocketed to 3.8 times. This disparity underscores how the CGT discount has effectively rewarded those with existing wealth, while making it harder for young Australians to afford their first home.
Political Debates and Economic Pressures
Housing affordability remains a hot-button political issue, with calls to reform the CGT discount gaining traction. Independent MPs, such as Dr Sophie Scamps, and the Greens support reducing the discount to level the playing field. However, the Liberal party opposes changes, with figures like Angus Taylor and Tim Wilson arguing it protects homeownership as part of the Australian dream, despite evidence that the discount does not aid first-time buyers.
Compounding the issue, external economic factors like rising interest rates and global oil price spikes, exacerbated by conflicts such as the US-Israel war on Iran, have further dampened the property market. These pressures have led to falling house prices in cities like Sydney and Melbourne, but this decline, driven by economic turmoil, is not a sustainable solution for improving affordability.
The Path Forward: Reforming Policies for Fairness
The upcoming May budget presents a critical opportunity to address these imbalances. By revisiting the CGT discount and other housing policies, the government can shift focus from wealth accumulation for investors to ensuring younger Australians have a realistic chance at homeownership. Without such changes, the wealth gap will continue to widen, perpetuating a system where land value growth benefits the already wealthy at the expense of aspiring homeowners.
In essence, as land values dominate household wealth, it is imperative to reform tax incentives that favour investors over young buyers, restoring the Australian dream of homeownership for future generations.
