Australians continue to bank on housing as pathway to wealth
A shortage of supply has only strengthened appetites for entering the residential property market
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Residential real estate in Australia accounts for $9.8 trillion, almost three times more than superannuation savings, new data reveals.
In signs that residential real continues to be the most popular pathway to wealth in this country, CoreLogic Australia’s Housing Chart for the June quarter shows that Australian superannuation is valued at $3.5 trillion while Australian listed stocks sit at $2.8 trillion and commercial real estate at $1.3 trillion. Those figures are set against borrowing levels with Australian mortgage holders in debt to the tune of $2.2 trillion.
The results come on the back of growing calls to address housing affordability issues and concerns about the effects of rising mortgage repayments caused by a 4 percent increase in the cash rate in just over 12 months that have left more households in financial stress.
The CoreLogic report also revealed that national home values have continued to rebound this quarter, up 2.8 percent, although they are still down -5.3 percent over the past 12 months.
CoreLogic research director Tim Lawless said the lack of housing supply was putting further pressure on rising home values.
“Through June, the flow of new capital city listings was nearly -10 percent below the previous five-year average and total inventory levels are more than a quarter below average,” he said. “Simultaneously, our June quarter estimate of capital city sales has increased to be 2.1 percent above the previous five-year average.”
CoreLogic head of research Eliza Owen said for investors, motivations for the rental hikes imposed on tenants was less clear. While she noted that many investors had not passed on the full impact of the increase in the cash rate – ATO data from 2020-2021 financial year showed that 47.1 percent of investment properties were negatively geared – the economics of supply and demand were still a factor.
“Irrespective of mortgage costs, rents can generally only rise substantially if the rental market is competitive, and tenants cannot find alternative accommodation to bargain with; in other words, rents rise when demand for rental accommodation is outweighing supply,” she said.
“Looking at rental supply in the context of rate movements, it’s clear that a tightening in the rental market occurred well before interest rates started to rise. The rental market started to tighten in mid-2020, while the cash rate wouldn’t go up for another two years.”
Earlier this week, Ray White chief economist Nerida Conisbee noted that while construction costs, particularly for key materials, had started to ease, building approvals were failing to meet demand for housing.
“Building approvals are currently at a decade low and it will take some time for the pipeline to build,” she said. “In the meantime, population growth is particularly strong. Last year, we saw an increase of almost 500,000 people.
“That means that in just one year, we need roughly an additional 200,000 homes. With 173,000 homes built last year, we are falling short in just one year by 27,000 homes.”
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As housing drives wealth and policy debate, the real risk is an economy hooked on growth without productivity to sustain it.
Strong consumer spending and tight supply have driven retail to the top of commercial property, but signs of pressure are starting to emerge.
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Australia’s retail property sector entered 2026 as the strongest performing commercial asset class, but rising geopolitical risks and cost pressures are beginning to test its resilience, according to new research from Knight Frank.
The latest Australian Retail Review shows the sector rode a wave of consumer spending and constrained supply through 2025, delivering total returns of 9.2 per cent and driving transaction volumes up 43 per cent year-on-year to $14.4 billion.
That momentum carried into early 2026, with around $3.6 billion in deals recorded in the first quarter alone.
“Retail clearly emerged as the standout commercial property performer in 2025,” said Knight Frank Senior Economist, Research & Consulting Alistair Read.
“Improving household spending, limited new supply and stronger leasing fundamentals combined to drive better income growth and renewed investor confidence in the sector.”
Spending rebound drives retail strength
A lift in household spending has been central to the sector’s performance. Consumer spending rose 4.6 per cent year-on-year to February 2026, supported by easing inflation and improving real incomes.
That shift flowed directly into retailer performance, with average EBIT margins across major retailers rising to 8.9 per cent in the first half of 2026, their strongest level in several years.
“Stronger consumer spending was critical in restoring momentum to the retail sector,” Mr Read said.
“Retailers have generally been better able to absorb costs, rebuild margins and support sustainable rental outcomes, particularly in higher-quality centres.”
Improved trading conditions also pushed leasing spreads up 4.2 per cent in 2025, reinforcing income growth and supporting capital values.
Geopolitical tensions begin to bite
But the outlook has become more complicated. The report warns that escalating conflict in the Middle East and its impact on fuel prices, supply chains and interest rates could weigh heavily on consumer spending.
“Higher fuel prices, flow-on cost pressures across supply chains, and recent interest rate increases are collectively squeezing household budgets, and early consumer sentiment data suggests confidence is already softening,” Mr Read said.
“While household balance sheets remain generally resilient, heightened uncertainty over future costs is likely to weigh on spending — particularly in discretionary categories — in the months ahead.”
The impact is already being felt in investment activity. While the year began strongly, transaction volumes slowed in March as investors paused amid the uncertainty.
“Early indicators suggest elevated uncertainty has already begun to affect the market. While retail investment enjoyed its strongest start to a year in a decade, with nearly $3 billion transacted by the end of February, activity stalled in March, as investors took a pause amid elevated uncertainty,” Mr Read said.
Solid foundations support medium-term outlook
Despite the near-term headwinds, Knight Frank maintains that the sector’s underlying fundamentals remain strong. Limited new supply, high construction costs and population growth are expected to continue supporting rental growth over the medium term.
“Retail has entered this period of uncertainty from a position of strength,” Mr Read said.
“Supply-side constraints, population growth and improving income fundamentals remain powerful structural supports for the sector.”
The report highlights several trends shaping the year ahead, including steady yields as interest rates rise, mounting pressure on tenant margins, continued outperformance of prime centres, the growing need for logistics integration, and risks linked to underinvestment in capital expenditure.
For now, retail remains a sector with momentum, but one increasingly at the mercy of forces far beyond the shopping centre.
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