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December 2, 2025 16 mins

New figures out on Monday show that the median house values in Sydney, Canberra and Brisbane have become, well, kind of insane. They’re the kind of figures that make people who’ve been desperately saving to break into the housing market tear at their hair by the roots.

But new research shows that allowing Australians to subdivide their properties could mean a million new homes being delivered in the nation’s five largest capital cities.

Today, senior economics correspondent Shane Wright, on whether this solution, which has eased price pressures in New Zealand, could be accepted here.

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Episode Transcript

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S1 (00:01):
From the newsrooms of the Sydney Morning Herald and The Age.
This is the morning edition. I'm Samantha Seelinger Morris. It's Wednesday,
December 3rd. New figures out on Monday show that the
median house values in Sydney, Canberra and Brisbane have become, well,
kind of insane. They're the sort of figures that make

(00:24):
people who've been desperately saving to break into the housing
market tear at their hair by the roots. But new
research shows that allowing Australians to subdivide their properties could
mean a million new homes being delivered in the nation's
five largest capital cities. Today, senior economics correspondent Shane Wright

(00:45):
on whether this solution, which has eased price pressures in
New Zealand, could be accepted here. So, Shane, first off,
can you just briefly remind us, I guess, just how
dire the current housing crisis is and connected with that
just how behind the government is in building the homes
that it pledged to build by 2029.

S2 (01:08):
Are there's so many different ways to measure the housing
stupidity of this country, be it the median house price,
which in Sydney is about 1.5 million, Australia's five capital
cities are in the top 20. Least affordable when you
measure them in terms of income required. In terms of
the number of homes we're building, the country needs about

(01:32):
240,000 a year to be built. Since 2016, we've been
building on average about 180. Doesn't take long to work
out that there's a shortfall. The government has set itself
a target of 1.2 million homes between 2024 and middle
of 2029. We're a year into that. There are only
a lazy 60,000 behind on that target, although we actually can.

(01:55):
You can see that there's starting to be a bit
of movement in terms of investors and building companies wanting
to build, Of course, that's inflationary. And because if you
got you're chasing after building all these homes and we've
already started to see that there's been a lift in
housing construction inflation now during Covid, during the previous government's

(02:16):
HomeBuilder program, housing construction inflation hit 20%. So lots of
demand from people who got free money to go and
renovate their kitchens and their bedrooms, coupled with huge shortages
and supply disruption of everything from screws to timber. Some
of the other aspects of it is that technically we

(02:39):
build the largest homes in the world, so we've got big,
sprawling places, big sprawling cities which require a lot of infrastructure.
And mostly at the heart of it is actually the
stupidity that is the Australian housing market.

S1 (02:53):
Now, many listeners are going to be like myself. I
think that they've never heard of the term gentle density.
It sounds pretty friendly. You've just written about it. So
what is gentle density and how might it actually help
fix our country's housing price crisis?

S2 (03:09):
Gentle density this is a term that gets used in
Britain a fair bit. Um, so it is, as we know,
if we drive around any suburbs, you just see standalone
homes on single blocks. Gentle density is saying, right, I
have a my home here in suburban Canberra, I'm allowed

(03:31):
to subdivide it and I can go for a dual
occupancy without restriction. That's what we're talking about. You could
go to a triple occupancy, but you're really restricting it
to say 2 to 3 homes or 2 to 3 storeys.
So that's the idea. If anyone who's been to Europe

(03:52):
would understand, if you go into some of the the
medieval cities, like the older ones, you can see that
they are 3 or 4 storeys. Manhattan's actually an example
where people walk up like a three, four, five story
walk up like that term. We're not quite to that level,
but just allowing people to build two homes on a

(04:14):
block that currently has one. As you can imagine, that
would greatly increase the amount of housing that you would have.
It would overcome the really strict planning laws that so
many councils have in this country. It's really aimed specifically
at those middle ring suburbs, um, like around Sydney, Brisbane, Melbourne, Perth,

(04:37):
where you can see they are large blocks, relatively close
to the city. But councils have just said no, that's it. Um,
but it comes at a huge cost. AKA the sprawling
size of our cities.

S1 (04:51):
Okay. And so in real terms, I guess, what does
this mean for the amount of new builds and you know,
how they can actually be added to already existing suburbs?
Because as you've written, this is a model that was
actually introduced in New Zealand over a decade ago, right?

S2 (05:04):
Yeah. Auckland went down this path because prices in Auckland
were climbing at the same pace as Sydney, like 15%
per annum. And Auckland went right. We're we're going down
a very different path. So you effectively say right, rather
than having a very prescriptive approach to planning, this is

(05:27):
very easy planning where you go right, the the default
position is yep, you can subdivide, not you can't subdivide.
And that it's a big change in the thought process
like here in Canberra. I live in a suburb, um,
very close to one of the centre of the the

(05:47):
urban centres of Canberra. The way the city is developed,
100 100m away. A friend of mine, same suburb I
I'm allowed to subdivide my my block. He is not
a hundred yards and it's because of the prescriptions around
planning regulations in the act, and the act is is

(06:09):
a bit different to the rest of the country. It's
not as restrictive.

S1 (06:12):
That's incredible. And so what would this actually mean for
house prices and those Australians who are absolutely struggling to
get a foot in the door of the property market?

S2 (06:22):
Well, the suggestion is by Ceda's Research, which is the
Committee for the Economic Development of Australia, that it doesn't
assume everyone will do this because you don't have to
do it, but it's giving choice back to the landholder
as to what they can do. They assume, say, 1
in 4 go down this path. That's an extra million
homes over, say, 10 to 15 years. So you're lifting

(06:46):
supply by about 12% in Sydney, 15% in Melbourne. You
lift supply, you will have an impact on prices. And
the Auckland example, property prices there didn't increase by between
15 and 27% as they would have otherwise done. That's
a huge saving for future New Zealanders. And this is

(07:07):
Ceda's argument. This would be a saving for future Australians
that they won't need mountains and mountains of cash. What
is it? The average mortgage new mortgage in New South
Wales now is $828,000. That's just stupid. That is stupid. Like, really?
You can see 50 year mortgages if you keep pushing

(07:28):
up prices, which requires higher debt, which then has a
whole other economic effects that, uh, you and I are
too silly to work out.

S1 (07:37):
Okay, well, that sounds like an absolute nightmare. Thanks for
introducing that into our into our morning, uh, thought bubble here.

S2 (07:42):
I'm. I am just here to help, I tell you.

S1 (07:45):
Okay, so this gentle density thing, like, on on paper,
it sounds great. You know, you've written that so often,
planners and governments, you know, they focus on extreme solutions
like high rise apartments or homes and sprawling outer suburbs
where people don't necessarily want to be. But is there
any potential downside to allowing property holders to subdivide their
home with few, if any, restrictions like could this backfire

(08:08):
in some way?

S2 (08:09):
Look, I'm sure the the population of NIMBYs out there
would be upset by it. Like this is the problem.
I actually live across from a place that was subdivided
and there's a couple in my street which and it
does not worry me in the least. I may be
an outlier in terms of, you know, not thinking it's
end of days. If the number of residents in my

(08:31):
in my street effectively double over a ten, 15 year period.
But of course there there is a cost. Like you
can't deny that if you are putting more people into areas, say,
these middle suburbs, it does put a strain on infrastructure
which we may not have properly maintained over the last ten, 20,

(08:51):
30 years. It does like if these people have children
straight off, you're going to put more kids into those schools,
the health services that are required in those areas. So
there is always some sort of impact. It's whether the
that cost is less than saying a huge expanse into

(09:12):
the wilds. What is it, Sydney? Sydney is now starting
at the Nepean River down near Picton. Uh, it is
a long, long way from the CBD. Like the infrastructure costs,
say the train lines or the roads or the new
schools that have to be built. But there's always that
extra cost that has to be considered and weighed up

(09:33):
against others. You've touched on, say, having huge towers, which
is upsets a lot of people. And and it is
understandable if you're living in a suburb, a small suburb,
around a small train line, and someone comes in and says, right,
we're going to build a 2030 storey tower, that would
absolutely make sense. And you're going, is there a better way?

(09:56):
But going to gentle density one, it's not as intimidating
for the local residents. Two it takes a lot of
pressure off to build such large residential blocks.

S1 (10:10):
We'll be right back. And this could be welcome news, right?
Looking into next year, we've got some bleak foreshadowing, I think.
Economists have already sort of forecast the chance of an
interest rate rise. And you've reported on plans that are
banking regulator might actually be tightening lending standards soon. Right.

S2 (10:31):
Yeah. Those things may actually work opposite to each other.
They may take the banking approach. Said right, banks, you
can't lend out as much cash to people who are
taking out loans six times to their debt levels. This
is almost certainly aimed at investors. And it's it's it's

(10:51):
a it's not really at the housing market per se
as a as as much as trying to stop banks
doing silly things and creating a financial mess. That's how the, the,
the apra's looking at it in terms of interest rates,
it's no surprise as soon as the reserve Bank started
lifting cutting interest rates, house prices started to climb. Everyone knows,

(11:12):
including the reserve Bank knows. As soon as that was
going to happen, that started. It was always going to
build up pressure in the housing market. But the reserve
Bank can't think of just one asset class. It's trying
to think of the entire economy. So it's it's a
difficult job for them. That's partly why APRA then goes right,
will come up with these regulations to try and take
some pressure off the housing market. And but that another

(11:37):
this is another element of a very like if it
was a jigsaw puzzle of a mess of the Australian
property market, where into one of those puzzles that are
going to take up a small room like it's 4
or 5000 pieces, there are so many different elements. So
anyone who comes up to you and says, right, I've
got the silver bullet, you go, nah. Yeah, yeah, I've
got a bridge I can sell you because there are

(11:58):
so many parts to the problem in this country.

S1 (12:00):
So I guess my next question has to be, what
are the chances that the state and territory governments are
going to put through this gentle density and allow it
to happen. Because, you know, as as you've taught me
in your many features, you know, this this is a
state issue with regards to who's, you know, allowing who
to build on land.

S2 (12:18):
Yeah. So the men's government in New South Wales and
the Allen government in Victoria are really leading the country.
The cook government in WA is also looking at allowing
more density around, uh, train lines out there because they've
put so much money into their, their public transport network.

(12:39):
So there are signs that the states, particularly those under
the greatest pressure, have got we can't let it keep going.
The federal government, it wants to hit its target like
the fact that it's set at target, uh, like it
was in Jim Chalmers very first budget in 2022. It
was a recognition that the stupidity had to end. We

(13:01):
had to find ways to build more homes. Yes, they're
behind on their target, but it is now absolutely front
and center where you've got state governments also going. We
just we are hurting current population, but we're going to
hurt future generations if we don't get something under some
sort of change, because the current policy up until the

(13:24):
last year or two clearly wasn't working. Clearly not.

S1 (13:28):
And as you said to me just before recording, and
you've written that the federal government is already offering $500
million to councils to help them provide necessary infrastructure for
new homes. And as you what did you call it
before we started recording? You said it's very clearly a bribe.

S2 (13:44):
It's a bribe. Like they're like, we don't want to
dress it up. But look, this is how federal government,
because it doesn't have direct responsibility. So half a billion
towards local councils, $1 billion to state governments to try
and get things done in this area, like there's a
$900 million productivity fund which is aimed at like like

(14:07):
was it the Jim Chalmers is giving? I think it's
1 or $2 million to the Northern Territory government to
do some planning regulation reform, which would allow Aldi to
go into Darwin to try and take some pressure off
grocery prices up there. All of this? Yep. You can
couch it up as innovative reform, you know, incentives. It's

(14:28):
a bribe. It's just a bribe.

S1 (14:30):
Yeah. And I love that you that you sort of
are calling it the way you see it, because I
think it is a testament. A testament to the desperation. Right.
Presumably to the federal government, an awareness that this is,
like you say, the stupidity is going to end.

S2 (14:41):
Well, Peter Dutton went to the last government last election
with a $5 billion bribe, um, to local councils to
help get their infrastructure in, especially in the outer suburbs. Built. Absolutely.
Makes sense because money talks to councils and to state governments.
It may be the one of the best ways to

(15:03):
get get their asses off, uh, off their chairs and
doing stuff.

S1 (15:08):
Well, Shane, always a pleasure to have you. So thank
you so much for your time.

S2 (15:13):
Always a pleasure to talk to you, Sammy.

S1 (15:22):
Today's episode of The Morning Edition was produced by myself
and Josh towers, with technical assistance by Debbie Harrington. Our
executive producer is Tammy Mills. Tom McKendrick is our head
of audio. To listen to our episodes as soon as
they drop, follow the Morning Edition on Apple, Spotify, or
wherever you listen to podcasts. Our newsrooms are powered by subscriptions,

(15:44):
so to support independent journalism, visit the page or smh.com.au.
And to stay up to date, sign up to our
Morning Edition newsletter to receive a summary of the day's
most important news in your inbox every morning. Links are
in the show. Notes. I'm Samantha Selinger. Morris, thanks for listening.
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