Residential real estate tops $10 trillion as Australians bank on bricks and mortar

The old adage ‘safe as houses’ has been given a shot in the arm with news that the value of Australia’s residential real estate has topped $10 trillion.

According to CoreLogic’s Monthly Housing Chart, it’s the first time national home values have hit double figures since June 2022 and places real estate as the top source of wealth for Australians.

The value of residential real estate exceeded superannuation on $3.5 trillion and listed stocks on $2.9 trillion. The commercial real estate market comes in fourth, worth $1.3 trillion.

In a volatile global economy, it’s clear that most Australians still prefer to invest in bricks and mortar with figures showing 56.3 percent of household wealth is tied up in housing.

While overall housing values in capital cities and regional centres were a mixed bag over the past 12 months to August, with the exception of Hobart, all the capital cities saw consistent growth in values over the past quarter.

Head of research at CoreLogic, Eliza Owen, said a lack of supply, net overseas migration and buyers drawing down savings, equity or profits from previous properties were all contributing factors to the steady increase in values over the past three months.

Whether this level of growth will continue, however, is uncertain.

“While there is a growing expectation that the RBA board is done hiking the cash rate, borrowing remains constrained by a relatively high serviceability buffer,” Ms Owen said. “APRA data to June showed the weighted average home loan assessment rate was just below 9 percent, and ABS housing lending data shows mortgage lending has fallen for three of the past four months.

“Economic performance is also set to unwind, and while this is good news for the inflation and cash rate trajectory, a rise in unemployment may create a higher degree of risk for mortgage serviceability.”

The Reserve Bank had little choice but to raise interest rates again this week.

Inflation was already proving stubborn before the latest Middle East instability added further pressure to energy prices and supply chains.

Housing inflation alone has averaged six per cent over the past year, remaining one of the single biggest contributors to CPI.

But while the focus remains on rates, the deeper problem is structural and far more dangerous.

Australia is not building enough homes, and the conditions required to fix that are deteriorating simultaneously.

Construction costs remain elevated. Builders are increasingly unwilling to absorb contract risk. Labour shortages persist.

Capital is becoming more expensive. And as borrowing capacity weakens and sentiment softens, fewer projects are becoming financially viable.

The result is a self-reinforcing cycle.

The RBA raises rates to fight inflation. Higher rates reduce development feasibility. Fewer projects start. Housing supply tightens further. Rents rise. Inflation persists. The RBA raises rates again.

The only long-term solution is supply, yet Australia remains nowhere near the National Housing Accord target of 240,000 new dwellings a year.

Completion continues to lag approvals, meaning many projects approved on paper are simply never making it out of the ground.

That gap matters enormously because housing is not just another sector of the economy.

Around two-thirds of Australian household wealth is tied to property, while the sector underpins millions of jobs and related industries. Weakness here quickly spreads beyond real estate.

We are already seeing signs of stress. Auction clearance rates in Sydney and Melbourne have softened, borrowing capacity has declined, and parts of the market are experiencing price corrections as confidence weakens.

At the same time, policymakers continue to debate tax measures such as changes to negative gearing and capital gains tax discounts, despite fears that such reforms could drive private capital out of the rental market at precisely the moment when supply is most constrained.

This is the paradox at the centre of Australia’s housing crisis.

Demand for property remains extraordinarily high, yet the economic conditions required to actually build new housing are worsening.

The Reserve Bank cannot solve that problem alone.

Monetary policy cannot accelerate planning approvals, reduce construction costs or create more tradies. It can only raise the cost of money until something eventually breaks.

And increasingly, that “something” looks like the development pipeline itself.

Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.

Residential real estate tops $10 trillion as Australians bank on bricks and mortar

Property remains the investment of choice for most Australians

Rising rates, construction inflation and shrinking investor confidence are pushing Australia deeper into a dangerous housing spiral that monetary policy alone cannot fix.