Before you read further here’s a huge disclaimer - this doesn’t factor in everything, this is intended as a though experiment painting in broad strokes and to ask some questions which seem to rarely get brought up when talking about home ownership.

Thought experiment

Most people seem to buy property with roughly the following assumptions. For simplicity I’ve largely based these on Sydney since that’s where I’m based.

1. House prices appreciate at roughly 10% per year
2. 3% inflation per year (the CPI kind)
3. $1m is the average house price*
4. $500 per week is the average rent - $26k per year
5. After-tax income is $120k for a couple - with roughly 3% raises every year **

I’m also willing to say that the government wants housing to appreciate as an asset, and will do what they can to ensure this stays true. This assumes that many politicians own property and that it’s useful for it to be seen as a “safe haven” investment - as for whatever reason most people are scared of investing in index funds.

This gives us

• House-price-to-rent ratio is 38.46 - So 38.46 years of rent repayments to pay off a house
• House-price-to-income ratio is 8.3 - this means it’ll take 8.3 years of dedicating 100% of income towards the house to buy it outright

Result

If we follow the following assumptions in 50 years we reach the following inflation adjusted figures (in todays dollars)

• $29.45m is the average house price - $1m * (1.10 - 0.03)^50
• $14,730 per week rent - $0.76m per year
• Median income is $120k