PHOTO: The investor share of new mortgage lending has grown from 10 per cent in the early 1990s to 40 per cent.(ABC News: Ian Cutmore)

Real home prices across Australia have climbed 150 per cent since 2000, while real wages have climbed by less than a third.

Sydney and Melbourne rank among the most expensive cities in the world. Australia-wide, home ownership levels have fallen from 70 per cent to 65 per cent in the past 20 years and home equity levels have fallen from 80 per cent to 75 per cent. Younger workers have been completely priced out of the major cities.

Among those who can afford homes, the increase in household debt to income ratios is weighing on consumption and increasing financial fragility.

We are often told the problem lies in supply — we don’t have enough homes in the places people want them. And while it’s true a reduction in the supply of housing relative to the population will reduce housing per person and increase housing rents, what we are seeing is something different — a growing divergence between rents and the price of housing as a financial asset that’s increasing much more quickly.

Australia has become something of a world leader in demand-driven home price inflation. Australians have been increasingly buying housing for the purpose of securing financial returns — both capital gains and rental income, in a process often described as the financialisation of housing, but one that we think can be more accurately thought of as “rentierisation“.