Australian Housing Worth Over $8 Trillion | Kanebridge News
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Australian Housing Worth Over $8 Trillion

As prices surge, so does the total value of the Australian residential real estate market.

By Terry Christodoulou
Fri, May 7, 2021 11:17amGrey Clock < 1 min

For most it’s hard to visualise or consider $8 trillion, however, according to the latest estimations, the Australian residential real estate market sits just over that figure at $8.1 trillion.

According to analysts at CoreLogic, the surge in value follows the recent broad-based capital gains witnessed across the country, indicating many markets are now at 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,” said Ms Owen in a statement.

Pushing the value of homes over the $8 trillion mark is data showing that in the three months to April, national home values rose 6.8% – the highest quarterly dwelling growth rate since December 1988.

The increased valuation is good news for homeowners, now likely in a strong equity position, with the RBA estimating just 1.3% of housing loans to be in negative equity position, according to Ms Owen.

Alternatively, it means for Australians looking to purchase their first property, homeownership is being pushed further out of reach, despite record-low mortgage rates.

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House values continued to fall last month, but the pace of decline has slowed, CoreLogic reports.

In signs that the RBA’s aggressive approach to monetary policy is making an impact, CoreLogic’s Home Value Index reveals national dwelling values fell -1.0 percent in November, marking the smallest monthly decline since June.

The drop represents a -7.0 percent decline – or about $53,400 –  since the peak value recorded in April 2022. Research director at CoreLogic, Tim Lawless, said the Sydney and Melbourne markets are leading the way, with the capital cities experiencing the most significant falls. But it’s not all bad news for homeowners.

“Three months ago, Sydney housing values were falling at the monthly rate of -2.3 percent,” he said. “That has now reduced by a full percentage point to a decline of -1.3 percent in November.  In July, Melbourne home values were down -1.5 percent over the month, with the monthly decline almost halving last month to -0.8%.”

The rate of decline has also slowed in the smaller capitals, he said.  

“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off, while persistently low advertised stock levels have likely contributed to this trend towards smaller value falls,” Mr Lawless said. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.” 

The RBA has raised the cash rate from 0.10 in April  to 2.85 in November. The board is due to meet again next week, with most experts still predicting a further increase in the cash rate of 25 basis points despite the fall in house values.

Mr Lawless said if interest rates continue to increase, there is potential for declines to ‘reaccelerate’.

“Next year will be a particular test of serviceability and housing market stability, as the record-low fixed rate terms secured in 2021 start to expire,” Mr Lawless said.

Statistics released by the Australian Bureau of Statistics this week also reveal a slowdown in the rate of inflation last month, as higher mortgage repayments and cost of living pressures bite into household budgets.

However, ABS data reveals ongoing labour shortages and high levels of construction continues to fuel higher prices for new housing, although the rate of price growth eased in September and October. 

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