Australian Residential Real Estate Market Set to Hit $9 Trillion

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.

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.

According to recently released data from CoreLogic, total residential property values are likely to reach $9 trillion by the end of 2021, the result of skyrocketing house prices and the government-supported construction boom.

This makes the residential property market worth almost 3 times more than the total Australian superannuation ($3.1 trillion), over 3 times larger than the Australian stock market ($2.8 trillion), and about 8 times larger than the commercial real estate sector ($978 billion), in total worth more than all three sectors combined, CoreLogic’s August research showed. 

The co-founder of Wealthi, Domenic Nesci provided a great overview of the situation in the video below. 

CoreLogic’s data also found that more than half of household wealth is held in housing, supported by $1.9 trillion in outstanding mortgage debt.

It is thought that Australian house prices will heat up further this year and continue into 2022, thanks to super-low borrowing costs and a lack of available homes.

CoreLogic recorded nearly 600,000 sales of residential property over the year, the highest levels seen since 2008. Sydney prices rose by 12%, or $140,000, over the 12 months to March, with the median price reaching more than $1.3 million according to Domain.

Since the coronavirus pandemic began, the Reserve Bank of Australia (RBA) has slashed its interest rate to a record low and flooded the financial system with the availability of cash. In Australia, Covid-related price gains in Brisbane, Melbourne, Perth, and Sydney have ranged from 6.1 per cent to 12 per cent, placing them in the middle of the pack among global cities.

House prices have nearly doubled nationwide and more than doubled in Sydney and Melbourne, the country's two biggest cities, since the global financial crisis of 2007-2009. 

While the property boom continues, it is continuing at a slower, but steadier 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. 

As in other major housing markets, that accelerating trend has created a divide between those with substantial savings who are already sitting on piles of home equity and those who are struggling to get on the property ladder.

While first-home buyers are dropping off in every state due to affordability constraints and fewer incentives, investors have stepped in, data found.

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.

The future for homeowners and investors in Australia’s leading cities remains rosy, with continued forecast growth. For those who are able to enter the market, forecast rates of growth still make the residential property a great investment and there’s still time to get on board.