The Australian Housing Market Has Exceeded $9 Trillion in Total Value
Published 5:21 am 11 Oct 2021
APRA’s macroprudential changes will do little to slow down this freight train.
While Australia’s property market growth is beginning to slow, new data from CoreLogic reveals just how unprecedented this year has been for Australia’s housing market.
Housing market growth slowed over the September quarter to 4.8%, down from 6.1% growth in the June quarter. However, the total valuation of Australia’s property has now reached $9.1 trillion, exceeding the total value of Australia’s commercial real estate, superannuation and Australian listed stocks combined. Furthermore, it was as recently as April that the value of the housing market had just surpassed $8 trillion.
This means that in just five months, Australia’s housing market has grown over $1 trillion in value.
And, over the past twelve months, Australia’s dwelling values have risen an enormous 20.3%, reflecting the highest annual growth rate since June 1989.
CoreLogic’s head of Research, Eliza Owen has stated that “The increase in value has coincided with national house values reaching $719,209 over September, and units sitting at $586,993.”
The CoreLogic report states that “Although growth conditions remain positive supported by an expectation that mortgage rates will remain at record lows for an extended period of time and strong demand is buoyed by persistently low advertised supply levels, it’s becoming increasingly clear the housing market moved past its peak rate of growth in March when national dwelling values increased by 2.8%.”
APRA’s macroprudential changes: Major or minor?
There was some uncertainty surrounding the continued growth of Australia’s housing market over the past few weeks given that the Australian Prudential Regulatory Authority (APRA) had announced it would be taking steps to mitigate Australia’s rapidly rising debt-to-income ratio.
More than one in five home buyers are now borrowing more than six times their income, up from 16 per cent a year earlier.
It was understood that there would be a tightening of lending conditions in order to rein in the size of loans given out to borrowers, however it wasn’t clear how drastic this tightening would be.
Last Wednesday, APRA announced that they will begin requiring banks to test whether a borrower could repay a mortgage at a mortgage rate three percentage points higher than the product rate on offer.
However, as CoreLogic has identified in a recent article, “major banks already have a required buffer of 2.5 percentage points in the serviceability assessment process, which was introduced in 2019.”
As such, the increase in the mortgage rate buffer will, in CoreLogic’s words, “likely only impact at the margins of borrowing demand.”
While this may not be APRA’s final macroprudential policy change, the most recent change in lending conditions will do little to temper Australia’s property market.
Forward outlook for the remainder of 2021
In the lead-up to APRA’s implementation of lending restrictions, we speculated that depending on how restrictive the measures were, we may see investors flock to the property market beforehand to take advantage of the existing conditions.
Given that the macroprudential policy changes are relatively minor, this immediate influx of investors may not be as pronounced as previously expected.
However, as New South Wales begins to exit out of its 107-day-long lockdowns, we can expect a spike in NSW’s property market, in both transaction activity and property values as restrictions ease. This has been the trend following prior lockdowns in both Victoria and New South Wales.
Victoria’s lockdowns are expected to end toward the latter half of October.
The main headwind for Australia’s housing market, as has increasingly been the case throughout the year, is affordability.
CoreLogic’s Head of Research Eliza Owen has stated that “Affordability is an increasing challenge for many segments of the market, but particularly first home buyers who have not had the benefit of home ownership as a source of wealth through equity generation. The announcement this week by APRA of further tightening of serviceability buffers is a subtle approach to financial stability and far less likely to move the housing market into negative territory.”
Is there any hope for those looking to buy property?
With record-high prices, and APRA keeping a close eye on the property market, it would seem the days of finding great property deals were over.
Well…what if I told you that it was possible to get 10% off your next property purchase?
OK, what about 20%?
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- DGI graduate Chris bought a property in Umina NSW for $150K below market value.
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- And then there’s Yvette, who picked up an off-market property in NSW for a $317,000 discount.
Finding a good deal in today’s market isn’t hard…if you know what you’re doing.
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