️ Highlights:
1. The combined value of Australian housing has reached $10 trillion, the first time it has hit double digits since June 2022. This is due to higher home values and an increase in the stock of housing.
2. The national recovery in home values began in March, with values rising 4.9% through August. This has recovered around half of the previous downturn, and home values are now just -4.6% from the peak in April 2022.
3. The rise in housing values is happening despite a cost of living crisis, low consumer sentiment levels, and four increases in the cash rate. Factors such as net overseas migration, the use of savings and equity, and constrained supply may be contributing to the continued rise in values.
4. Demand for housing is being pushed higher by returning overseas arrivals and a drop in overseas departures. Additionally, there may be a draw-down in savings, equity, or profits from previous home ownership being used towards property purchases.
5. The housing market outlook remains uncertain, with borrowing constrained and economic performance set to unwind. While there is a growing expectation that the Reserve Bank of Australia is done hiking the cash rate, there are concerns about mortgage serviceability and credit conditions. A more robust recovery in housing values may be limited until credit conditions loosen.
As of the end of August 2023, the Australian housing market has remarkably rebounded, reaching a valuation of $10 trillion. This milestone, achieved for the first time since June 2022, is a testament to the resilience and dynamism of the Australian property sector. This article delves into the underlying factors that have facilitated this resurgence, despite prevailing economic headwinds.
Market Dynamics
The surge in the housing market value is attributed to a confluence of factors including an increase in the median home value, which stood at $732,886 at the end of August, and a growth in the housing stock to approximately 11 million properties. The national recovery trajectory initiated in March has seen home values escalate by 4.9% through to August, mitigating half of the downturn experienced between April 2022 and February 2023.
Contributing Factors
Despite the ongoing cost of living crisis and low consumer sentiment, the housing values have continued on an upward trend. The analysis identifies three pivotal factors driving this growth:
- Net Overseas Migration: The demand for housing has soared due to a rise in returning overseas arrivals coupled with a decrease in departures. This trend, along with low rental vacancy rates, has fostered a competitive property market.
- Utilization of Savings, Profits, and Equity: Individuals are leveraging their savings, profits from previous home ownerships, and equity for property acquisitions, a strategy that has sustained the market growth amidst a decline in borrowing.
- Limited Supply: The market is characterized by a constrained supply with listing volumes remaining substantially low, a scenario that has further fueled the competitive landscape.
Market Outlook
While the recovery trend showcases a promising trajectory, the future remains uncertain owing to potential economic downturns and stringent credit conditions. The current economic indicators suggest a cautious optimism, with a focus on the evolving credit landscape and economic parameters.
Conclusion
As the Australian housing market navigates through unprecedented times, it stands resilient with a valuation of $10 trillion. While the journey ahead is fraught with uncertainties, the market exhibits a robust recovery potential, guided by strategic economic policies and a dynamic market ecosystem.