Australian residential property market hits $8 trillion for first time

author-avatar By on May 07, 2021
Australian residential property market hits $8 trillion for first time

Residential property has emerged as the number one pillar of Australia's wealth, surging ahead of superannuation, the ASX and commercial real estate.

The total value of residential real estate in Australia has reached $8.1 trillion for the first time, according to CoreLogic.

That's more than the gross domestic product (GDP) of every country on earth with the exception of the United States and China.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.


It comes after months of runaway property prices across the country, with many markets now reaching their peak.

The Australian dwelling market has reached fresh record highs for the past four months, but the end of April marked the first time the total value of Australian housing broke the $8 trillion dollar mark," said CoreLogic head of research Eliza Owen.

“This puts Australian residential property at around four times the size of Australian GDP, and around $1 trillion more than the combined value of the ASX, superannuation and commercial real estate stock combined."

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Source: CoreLogic

To put that into perspective, Australia's superannuation industry is worth $3 trillion, less than half the value of residential real estate.

Meanwhile, Australian listed stocks are worth $2.7 trillion and commercial real estate is worth less than $1 trillion.

CoreLogic analysis shows more than half of household wealth is tied up in housing across 10.6 million dwellings.

With mortgage interest rates at record low levels, this is yet another sign of Australians taking advantage of cheap debt and pouring their money into the property market. 

CoreLogic analysis shows in the three months to April, national property values soared by 6.8% - the highest quarterly dwelling growth rate since December 1988.

Last month, property values rose 1.8% according to CoreLogic figures after hitting a 32-year high in March.

The latest statistics from the Australian Bureau of Statistics (ABS) also show that new loan commitments soared 5.5% in March to hit a new record of over $30 billion in loans.

Recent SQM analysis found that in Sydney, property asking prices surged by a massive 6.1% in just four weeks as vendor confidence builds.

Ms Owen said this puts property owners in a strong position, but the news isn't as good for first home buyers.

The increase in the value of residential real estate has put Australian home owners in a strong equity position, with the RBA estimating just 1.3% of housing loans to be in a negative equity position at the start of 2021," she said.

"However for many Australians looking to get a foot on the property ladder, the continued strength in the market is putting home ownership further out of reach despite record low mortgage rates.

"Wages growth simply isn’t keeping pace."

In a speech on Wednesday night, Reserve Bank (RBA) Deputy Governor Guy Debelle said the bank is more concerned with bringing down the high unemployment rate than addressing high house prices.

"It is important to remember that while housing prices may not rise as fast without the monetary stimulus, unemployment would definitely be materially higher without the monetary stimulus," Dr Debelle said.

"Unemployment clearly has large and persistent distributional consequences."

He added that while the economy has performed well on many fronts, wages growth, which is currently sitting at an historic low of 1.4%, is not one of those.

"While the Australian economy has experienced better employment outcomes than most other countries, wages growth in Australia has been noticeably weaker than in many comparable economies, most notably the United States." 


Photo by Titus Aparici on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's passionate about empowering people to make smart financial decisions and improve the financial literacy of Australians by translating complex finance topics into understandable, relatable content.

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