Housing Crisis to Explode in 2025 – Who’s to Blame?

By Abel Kalpi Nand Prasad

Former Prime Minister of Australia John Howard rejected the claim he was to blame for the crisis. Picture: NewsWire / Martin Ollman

Australia’s housing affordability crisis is set to hit breaking point in 2025, with experts predicting further price surges despite interest rate fluctuations. While the issue has been decades in the making, many are pointing the finger at one man – former Prime Minister John Howard – as the key architect of the problem.

The housing market has long been out of reach for many Australians, particularly younger buyers. For over 25 years, property prices have risen at almost double the rate of wage growth, making homeownership increasingly unattainable. While some cities have seen slight corrections in property values, the overall outlook remains bleak for first-time buyers facing skyrocketing rents and high costs of living.

With expectations of a cash rate cut looming, concerns are growing that any reduction in interest rates will only fuel another surge in property prices. Forecasts indicate that house prices in major cities could increase by more than 5% in 2025 alone, making the Great Australian Dream even harder to achieve.

John Howard’s Role in the Crisis

ABC finance expert Alan Kohler has argued that John Howard played a significant role in the housing affordability crisis. The former Prime Minister’s decision in 1999 to cut Capital Gains Tax (CGT) by 50% for individuals – after it was introduced by the Labor government in 1985 – created a market where property became more of an investment vehicle than a fundamental human necessity.

Howard has consistently defended his policy, stating that protecting the family home from CGT was critical. “The principal asset most Australians have is the family home, and I will continue to fight to keep it from Capital Gains Tax,” he previously stated.

However, Kohler argues that this policy, combined with the rejection of Labor’s proposal to limit negative gearing benefits to new homes, has led to an unsustainable market. With the federal government aiming to build 1.2 million new homes by 2029, state governments in NSW and Victoria are scrambling to meet this target. Yet, Kohler believes the goal is unachievable due to the astronomical infrastructure costs associated with creating new suburbs.

“The cost of population growth and housing affordability will be borne by existing residents in the form of crowded roads, public transport, schools, and hospitals,” Kohler warns. Until Australian homeowners accept that urban densification may impact their property values, housing affordability will continue to spiral.

Real Estate Agents Predict Tougher Conditions

Industry experts and real estate agents are forecasting further property price increases in 2025. According to a CoreLogic report, two-thirds of agents believe house prices will rise due to improving affordability, higher incomes, and potential interest rate cuts.

In Queensland, which has benefited from strong internal migration, 70% of surveyed agents predict price growth, while Melbourne is expected to recover from recent price declines. Despite these shifts, the Reserve Bank of Australia anticipates that household disposable income will only increase by 2.4% in 2025 – meaning property values will still rise at twice the rate of wage growth.

For those saving for a deposit, this paints an increasingly challenging picture. Meanwhile, recent homebuyers are relieved as interest rates are predicted to decline. Westpac has already slashed fixed rates by up to 0.40 percentage points ahead of the Reserve Bank’s upcoming cash rate decision.

Global Influences and Economic Uncertainty

Australia’s property market is also impacted by global economic conditions, particularly from the United States. Recent inflation figures in the US suggest that interest rate decisions could remain volatile, with former President Donald Trump placing blame on Joe Biden’s administration for rising costs. Trump has called for rate cuts, arguing that they would support his broader economic policies – though some experts warn this could drive inflation higher.

As the world watches how major economies manage inflation and interest rates, Australia’s housing market remains at a crossroads. The challenge of affordability is one that requires urgent action – and without significant policy changes, it seems homeownership will continue to be a privilege rather than a right.