APU - Australian Property Update | Australia's Property Market Reaches $10 Trillion

The combined value of Australia’s residential property market has hit a whopping $10 trillion, according to CoreLogic, for the second time in history - the first being in March last year.

The total value has been pushed upwards by rising house prices and an increase in housing stock.

Since house prices reached a floor in February, they’ve quickly rebounded, increasing over the last six consecutive months.

And as CoreLogic’s head of residential research, Eliza Owen, points out - prices have risen despite multiple substantial headwinds, proving Australian property to be incredibly resilient.

“The national recovery in home values began in March this year, with values rising 4.9 percent through to the end of August,” said Ms Owen.

“This recovery has wiped out around half of the preceding downturn between April 2022 and February 2023, when national home values fell -9.1 percent peak to trough. Home values are now just -4.6 percent from the peak in April 2022.

“The recovery trend in values comes despite a cost of living crisis, low consumer sentiment levels and four increases in the cash rate so far this year amid the fastest rate hiking cycle on record. It begs the question, how is this possible?”

House prices have edged upwards despite rising interest rates, buoyed by a sharp increase in migration, record high savings ratios during the pandemic, and limited housing supply.

And it’s resulted in a higher median house price. According to data from the ABS, the average price of a dwelling rose $8,500 over the March quarter, to $896,000.

Domain figures, as published by The Guardian, showed that in the first six months of this year, house prices in Sydney were accumulating $500 of growth every single day.

Rising house prices are benefiting homeowners, but dampening property dreams of first home buyers nationwide.

They’re also forcing a widening gap of the wealth divide, with homeowners more likely to benefit from a faster rate of wealth accumulation than renters.

House prices contributing to a widening wealth gap

According to an ABC report, more than a quarter of homeowners reported net wealth of over $1 million in 2020.

On the other hand, the ABC reported that the median net wealth for households who don’t own a home was just $60,000.

It represents a huge disparity in wealth distribution, that’s likely set to worsen as homeownership becomes increasingly unachievable for many.

Home values over the last 30 years have increased substantially, but the pandemic saw prices skyrocket, moving the goalpost yet again for aspiring homeowners struggling to save a 20 percent deposit.

The Grattan Institute’s Brendan Coates and Joey Moloney pointed out in an article published by The Conversation that the divide is becoming widely entrenched, and will continue to do so as families pass down property wealth, and those without get left behind.

This rings true especially if you consider that most first home buyers only get a foot in the door with the help of parents. Parents with their own properties are able to help by going guarantor, or by gifting cash for the purpose of a deposit.

But young people in families without property assets are often left to their own devices in the quest for property ownership.

It’s a harsh reality, especially when property can be more profitable than hard, honest work.

“Economists Josh Ryan-Collins and Cameron Murray estimate that up until June 2019, in more than half of the previous 30 quarters the median Sydney home earnt more than the median full-time worker,” wrote Mr Coates and Mr Moloney.

They claim that Australian housing is creating a ‘Jane Austen world’, where wealth is not created by hard work, rather decided upon by the family someone is born into.

It’s a dystopian world that could scarily mirror our real one.

Jane Austen-esque or not, there’s no denying that Australian property is a hard train to stop. And if you don’t hop on now, you could very much miss out.

For first home buyers who don’t have the bank of mum and dad to fall back on, there are government initiatives to help them into the market.

The First Home Guarantee allows first home buyers to purchase a home with only a 5 percent deposit, without paying lenders mortgage insurance.

And the Albanese government recently announced that a shared equity scheme will begin in July next year, helping home buyers into a home by purchasing a share of it.

These initiatives won’t solve the housing crisis, but they could help to provide a path to home ownership and out of renting.