Australia's property market tipped to reach $9 trillion later this year: CoreLogic

Australia’s residential property market is tipped to be worth $9 trillion later this year, thanks to skyrocketing house prices and an ongoing construction boom, according to CoreLogic.

At the moment, residential real estate is worth a staggering $8.8 trillion dollars. That’s worth more than Australian superannuation ($3.1 trillion), the Australian stock market ($2.8 trillion) and commercial real estate ($978 billion) combined, CoreLogic’s August indices revealed.

The value of Australian homes only reached $8 trillion in March this year and is on track to reach its next trillion-dollar milestone later in 2021.

“It won’t be too long before it breaks the $9 trillion mark,” said Tim Lawless, CoreLogic research director. “We’re going through a construction boom, and housing values are rising very swiftly.”

As a result, there was more housing stock, and it was worth more, too, he said. More than half of household wealth is held in housing, with $1.9 trillion in outstanding mortgage debt.

“Household spending is the biggest component of economic activity. This is why we have so much attention on the housing market,” Mr Lawless said.

While the market was still red hot, it was “not as hot” as it has been due to affordability constraints and lockdowns starting to slow down the rate of growth, he said.

Australian property prices rose 5.9 per cent in the three months to July, down from the peak of 7 per cent in the three months to May 2021.

It is still a broad property boom, with every city recording a gain, albeit at a slower pace.

At a city level, Hobart led the way over the quarter, with property prices increasing 8.2 per cent.

It was followed by Sydney, where dwelling values jumped 7.7 per cent in the same period.

The broad-based surge in property prices is still driven by historically low mortgage rates in a market where there are still overwhelmingly more buyers than there are properties.

In July, the total number of homes listed was 27.1 per cent below the five-year average nationally, while sales volumes were 42.6 per cent above the five-year average.

As a result, the market remained firmly in favour of sellers, Mr Lawless said, with vendor discounting extremely tight across the country, down 2.8 per cent in the three months July.

“The common factor is that low interest rates are continuing to drive demand,” he said. “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.”

He said the rate of price growth was likely to slow down as demand from priced-out buyers eased at the same time more sellers listed their properties on the market 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.”

While first-home buyers are dropping off in every state due to affordability constraints and fewer incentives, investors have stepped in, the data found.

Investor participation rose in each state and territory over June, with the exception of Queensland, where investor lending was dwarfed by a 1.8 per cent lift in owner-occupier lending.

“You can understand why affordability is becoming a problem. It simply means it is taking longer for some segments of the marketplace to save a deposit and get a loan.

“That is a clear area of concern for APRA. The rate of growth will continue to taper in 2021 and 2022 mostly due to affordability but also due to the risk of tighter credit conditions ahead.”