Investors are making a killing from soaring house prices

House prices are soaring, and wealthy property investors are making a killing. Over the past year, the median national house price has surged 8.3 percent, or $96,424, to $1,253,522. In Sydney, the median house price is now a shocking $1.75 million. Prices have risen fastest in the past couple of months, up by 1.1 percent in October alone.

This jump in already unaffordable house prices is a consequence of a housing market that subordinates people’s need for a home to the profits of developers, wealthy investors and banks. Within that general framework, Labor’s 5 percent deposit scheme is supercharging price increases, and investors are benefiting at the expense of working-class households.

Labor’s scheme allows first home buyers to apply for a mortgage with a 5 percent deposit, instead of the usual 20 percent. It is a policy that saddles buyers with more debt, increases competition at the lower end of the market and signals to sellers that they should hike prices to take advantage of purchasers’ increased borrowing capacity.

Red Flag published an article about this policy last month, and the prediction that it would raise prices and make the housing crisis worse has already proven correct. Research by Cotality reported by the ABC shows that prices for properties that could be bought using the scheme increased much faster than those that couldn’t. For example, in Melbourne’s inner east, properties under the $1.5 million threshold increased by 1.7 percent in October, while those above it increased by 0.4 percent.

Despite Labor’s assurances that the inflationary effect of the scheme would be minimal, property investors could spot the obvious: house prices were going to rise. Investors got in early, buying properties before the scheme began, in the expectation that prices would rise. As Greg Jericho reported in the Guardian, investor lending in September rose 18 percent, the biggest increase in twenty years, and investor loans are at their highest point since 2017.

Those investors are now making significant gains. If you’re able to buy a third, fourth, fifth or 100th property, a scheme sold as helping struggling working-class families is delivering you windfall returns. The median-priced property you bought in September is already worth almost $20,000 more in just two months, and with prices predicted to keep rising, so too will your profits.

It is the rich who are benefiting from this Labor-backed investment bonanza, not the “mums and dads” of political myth. “The Everyman Archetype”, a 2019 study published in the Housing Studies journal, found that households that own investment properties have, on average, double the income and three times the net wealth of those who don’t. The professions that claim the most tax breaks for rental properties are surgeons, anaesthetists and barristers.

Only around 15 percent of Australian households own an investment property, and the majority of properties are owned by those who have two or more. Only 2,500 investors own more than ten properties, 172 investors own twenty or more properties, and the top 1 percent of investors own 25 percent of all properties.

Contrary to another myth, these investors are predominantly not foreign buyers or migrants. Data from the Australian Tax Office show that in 2023-24, foreign buyers purchased only 1 percent of properties. There are no direct statistics on how many migrants are property investors, but a Propertytology report based on Bureau of Statistics data found that, between 2013 and 2023, recent migrants accounted for 7 percent of all property purchases, including owner-occupied purchases, so they can hardly make up a significant number of investors.

It’s people like Nathan Birch who are getting rich from property, not ordinary mums and dads or migrants. Nathan owns 300 properties worth almost $250 million and dreams of becoming a billionaire. Earlier this year, he told the Daily Telegraph: “My goal is to have 10,000 properties one day ... I hope that when I die, my life will be like a corporate entity”.

Asked whether she thought that Labor’s deposit scheme was a failure, Housing Minister Clare O’Neil told the ABC, “What these numbers tell us is that this program is working”. Working for who? It’s not working for working-class households, who are being gaslit by Labor policies that promise to make housing more affordable but only increase the profits of the rich.