The great Australian squeeze: families, retirees and renters all paying the price of the housing crisis

Despite the modest decline in property prices in Australia’s largest cities and a modest slowing around the country, the ongoing housing crisis continues to have a harsh impact on tens of thousands of Australians.

An inedible image from a recent visit to Melbourne was that of a mother and two primary school aged children reading by torchlight in the carpark of a popular fast food chain outlet.

Preferring to use her first name only, Jacinta said she’d ended up homeless when she decided a public car park was a safer option than staying with her aggressive husband.

“I never thought I’d end up in a situation like this,” she said, giving API Magazine permission to publish her comments.

“I gave up a reception desk job after the birth of my second child because childcare was not an option and my husband earned more than me.

“It was amazing how quickly things spiralled. I’ve tried to get help from various (government and charity) agencies but it feels like I’m just one of so many facing the same shitty situation.”

It’s a similar picture around the country.

In Sydney, Rev Bill Crews Foundation said demand for support services has increased by 39 per cent since Easter, describing the need as “bottomless and endless.”

While those who end up on the street are the most visible sign of the cost of living crisis, the impact of high property prices, inflation, rising unemployment and social housing waitlists that run into the years, not months, affects households in many different ways.

A newly published study found that a shocking 42 per cent of those who separate continue living together because they cannot afford to live in separate households. 

The Real Separation Report 2026 examined how cost of living pressures, financial dependence and housing challenges are shaping separation decisions and experiences.

It found that close to 3 in 5 (56 per cent) experienced housing instability or downsizing after separation, while nearly half (45 per cent) took on new debt due to separation, with a third of people borrowing more than $5,000 to make ends meet.

Over 1 in 3 (35 per cent) said separation cost more than expected, driven by some unexpected costs, such as increased living expenses (32 per cent) and setting up separate households (30 per cent).

Elise Fordham, Principal Lawyer, Hitch Advisory, said the way separation unfolds can have a major impact on long-term emotional and financial recovery.

“A high conflict split often leaves people carrying anger, resentment, and stress long after the split. On the other hand, those who manage to separate respectfully tend to recover emotionally much faster,” she said.

“Delays in formalising property and parenting arrangements can significantly extend the period of instability.

“When agreements are left open-ended or informal, it creates ongoing uncertainty that affects housing decisions, financial planning, and even your ability to move forward emotionally.

“Finalising these arrangements provides the closure needed to truly start rebuilding all aspects of your life.”

Children missing inheritance opportunities

For those who do manage to attain a degree of financial security through home ownership, passing that property on to children has long been seen as a way to secure a financial future for a younger generation that is finding it increasingly difficult to gain a foothold on the property ladder without assistance or inheritance.

As the Government overhauls property investment rules, including restrictions on negative gearing, replacing the 50 per cent capital gains tax (CGT) discount, and banning SMSFs from borrowing to invest in residential property, new research from has highlighted how Australians are losing faith that property will remain the pathway to generational wealth it once was.

Offset and redraw accounts are designed to help borrowers get ahead on their mortgage, not survive from one month to the next, but that’s increasingly what’s happening.

- Shaun McGowan, homeloanrates.com.au

A nationally representative survey of more than 1,000 Australians by Money.com.au found the majority (53 per cent) don’t believe they’ll be able to pass property on to future generations through homeownership or property investment as previous generations did. Just 47 per cent believe they still can.

Money.com.au’s Property Expert, Nick Burgess, said Australians are questioning whether property can still deliver the same wealth-building opportunities it has for previous generations.

“Property has traditionally been seen as one of the most reliable ways to build wealth through capital growth and rental income, and to create some financial legacy for future generations but now, more people believe that opportunity is slipping away and confidence in bricks and mortar is eroding,” he said.

“Affordability remains the biggest obstacle, but it’s notable that many Australians believe government policy is making property investment less rewarding.

“Changes to negative gearing, CGT concessions and SMSF borrowing are pouring cold water on the aspirations of millions of Australians, many of them mum-and-dad investors, to build wealth through property and pass it on to their children and grandchildren.”

Older Australians less convinced property will create lasting legacy

The survey also revealed a surprising generational divide over property’s ability to create intergenerational wealth.

Australians closest to retirement were the least confident that property would provide a meaningful inheritance for future generations. More than half of both Generation X and Baby Boomers (56 per cent) said they did not expect to pass significant property wealth on to their children, compared with 47 per cent of Millennials and 46 per cent of Generation Z.

According to Mr Burgess, that reflects the differing perspectives of each generation.

“Older Australians are the ones approaching the point where they’ll actually be transferring wealth, so they’re naturally more aware of how changing housing affordability, taxation settings and investment conditions could affect what they’re ultimately able to leave behind,” he said.

“If the generations that have benefited most from Australia’s property boom are becoming less confident about the legacy they’ll pass on, that’s a notable shift.

“Younger Australians, by contrast, are more likely to be focused on the challenge of getting into the housing market in the first place than thinking about passing wealth on decades from now.”

Housing affordability remains the biggest obstacle

Affordability continues to dominate concerns about wealth creation through property.

More than half of respondents (51 per cent) said high property prices and rising mortgage costs had made entering the market too difficult, making affordability the single biggest barrier to building long-term wealth through real estate.

A further 27 per cent believed wages had failed to keep pace with escalating housing costs, while 22 per cent said changes to government taxation and investment policy had reduced the financial appeal of residential property investment.

The housing and cost of living pressures are also manifesting through heightened mortgage stress.

More than one in three Australian homeowners have been forced to withdraw money from their offset or redraw account over the past year as rising mortgage repayments and living costs eat into the financial buffers they once relied on to get ahead on their home loan. 

New research from homeloanrates.com.au reveals 36 per cent of homeowners with an offset or redraw facility have withdrawn funds from these accounts in the past 12 months due to financial pressure. Those who dipped into their mortgage buffer withdrew an average of $14,000.

CEO Shaun McGowan said many homeowners are being forced to raid the very savings buffers they built to protect themselves from financial shocks. 

“Offset and redraw accounts are designed to help borrowers get ahead on their mortgage, not survive from one month to the next, but that’s increasingly what’s happening and they’re becoming a lifeline,” he says.

“Three interest rate hikes this year have piled hundreds of dollars onto monthly mortgage repayments, and many households have run out of room to manoeuvre; they’re dipping into money that was originally set aside to get ahead on their loan just to keep up with rising insurance premiums, utility bills and the cost of putting food on the table for a family.

“For a lot of households, these accounts have acted as a shock absorber during a period of intense financial pressure.

“The concern is that once those savings buffers are exhausted, there are fewer options available if interest rates remain high, unexpected bills arise or household income takes a hit.”