Property Market to Hit $9 Trillion
The Australian residential property market is set to reach a massive $9 trillion milestone later this year. Economic uncertainty and ongoing lockdowns across the country have failed to dampen the market, which is tipped to hit and exceed this huge number. The value of Australian homes already tipped the $8 trillion mark earlier this year, with the collective Aussie home now worth more than the commercial property, superannuation, and Australian stock markets combined.
According to Tim Lawless from CoreLogic, the Australian residential property market is on the way up: “It won’t be too long before it breaks the $9 trillion mark." said the research director, adding "We’re going through a construction boom, and housing values are rising very swiftly.” To put things in perspective, the current superannuation market is worth $3.1 trillion, the Australian stock market is worth $2.8 trillion, and the commercial real estate sector is worth just $978 billion.
Based on CoreLogic data, Australian property prices rose 5.9% in the quarter to July, which is strong but down from the 7% peak growth recorded in the three months to May. Every state capital recorded gains, with Hobart leading the way with 8.2% growth, and Sydney not far behind with 7.7%. While numbers in the NSW capital are likely to be subdued in coming months for obvious reasons, even now, figures are exceeding expectations.
The nationwide surge in property prices is being fuelled by attractive mortgage rates, which are historically low and still attractive to many buyers. There is also a significant discrepancy between supply and demand, which is the fundamental factor affecting all market growth. There are more buyers than properties in most Australian markets, with state capitals still under pressure and regional markets seeing an uptick in migration due to the pandemic.
In July, the number of homes listed across the country was a massive 27.1% below the five-year average. In the same period, sales volumes were 42.6% above the five-year average, with this single discrepancy going a long way towards explaining current market conditions. With the market firmly on the side of sellers, vendor discounting was down by 2.8% in the July quarter.
According to Mr. Lawless, “The common factor is that low interest rates are continuing to drive demand... It’s also that disconnect between supply and demand that is at the crux of driving housing prices higher. Discounting rates also showed how skewed the market is towards vendors.” Current conditions are doing no favours to first-home buyers, with numbers on the decline across the country. Getting into the market remains a big issue for many, with lack of affordability fuelled by rising investor activity in every state except Queensland.
However, despite high prices across the country, and a record milestone for the national market, the rate of price growth is likely to slow for the remainder of 2021 as demand drops in key markets. While the timing is anything but certain, more sellers are expected to list their properties once restrictions ease. “If those two things happen or even if we do see supply rising, that should help rebalance the market towards buyers and dampen this rapid price growth further.” said Mr. Lawless.