Australians continue to bank on housing as pathway to wealth

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.”