Bianca Healey| Business Insider| 12 August 2021
The value of the Australian property market hit an astounding $8 trillion in March — and is now on track to reach its next trillion-dollar milestone by the end of this year.
Newly released CoreLogic data shows that total residential property values are likely to reach $9 trillion by the end of 2021, a result of skyrocketing house prices and the government-supported construction boom.
Currently residential real estate is worth a massive $8.8 trillion dollars; the result of a surge that saw property prices increase by 20% in some Australian capital cities in the past year.
Sydney prices rose by 12%, or $140,000, over the 12 months to March, with median price reaching more than $1.3 million according to Domain.
This makes the residential property market worth more than Australian superannuation ($3.1 trillion), the Australian stock market ($2.8 trillion) and commercial real estate ($978 billion) combined, CoreLogic’s August research showed.
It’s data also found that more than half of household wealth is held in housing, with $1.9 trillion in outstanding mortgage debt.
Eliza Owen, head of research at CoreLogic said low interest rates in response to the pandemic continued to result in “some extraordinary figures in the housing market.”
CoreLogic recorded nearly 600,000 sales of residential property over the year, the highest levels seen since 2008.
“We’ve got more than half of household wealth made up of housing value,” Owen said, adding that outstanding debt levels are now sitting at about $1.9 trillion.
Trends that caused the explosion in property prices beginning in December last year, including low mortgage rates, cheap debt and household savings due to lockdowns are unlikely to change in the last months of this year, Owen said.
The household savings rate rose to about 21% at its peak during 2020, compared with a decade average of about 7.5%.
While the property boom is ongoing, it is continuing at a slower, but steady pace.
In the three months to July, national home values rose 5.9%, down from a recent peak of 7.0% in the three months to May 2021, CoreLogic found.
Across Australian cities, Hobart led the way this past quarter, with property prices increasing 8.2%.
Sydney followed with dwelling values jumping 7.7% in the same period.
Surging prices continued to be driven not just by historically low mortgage rates, but also a market where buyers still vastly outnumber available properties.
In July, the total number of homes listed was 27.1% below the five-year national average, while sales volumes were 42.6% below the five-year average.
Owen said that as a result, the market remained firmly in favour of sellers. She expects to see first home buyer participation to decline, though it was still well above average levels.
First-home buyers also dropping off in every state due to affordability constraints and fewer incentives, the research showed, while investors have stepped in.
Investor participation rose in each state and territory over June, with the exception of Queensland, where investor lending was dwarfed by a 1.8% lift in owner-occupier lending.
“We do expect that first homebuyer participation will continue to decline, because not as many incentives are available to them now as they were through 2020,” Owen said.
“Prices are becoming more out of reach for a lot of those buyers.”
Supply was also contributing to elevated price levels, Owen said, “not necessarily in the construction of new homes, but in people actually putting their properties up for sale.”
Newly advertised stock is sitting at about 25% below where it has been historically. She said.
“At the same time that you’ve got a lot of demand in the market, there’s not a lot of new stock coming online for people to buy.”