The value of Australia's housing rebounds to $10 trillion – but how?

CoreLogic explains why values continued to rise despite seemingly unfavourable growth conditions

The value of Australia's housing rebounds to $10 trillion – but how?


By Mina Martin

The value of Australia’s housing has rebounded to $10 trillion in August, due to a combination of higher values, with the median home value hitting $732,886 at the end of the month, and the housing stock lifting to around 11 million properties, according to CoreLogic.

The $10 trillion figure was the first time the total estimated value of Australia’s housing hit double digits since June 2022.

Eliza Owen (pictured above), head of residential research Australia at CoreLogic, said home values started to pick up in March this year, with values rising 4.9% through to the end of August. The increase has recovered around half of the preceding downturn between April 2022 and February 2023, when national home values plunged -9.1% peak to trough. Home values are now down just -4.6% from the peak in April 2022.

“The recovery trend in values comes despite a cost-of-living crisis, low consumer sentiment levels, and four increases in the cash rate so far this year amid the fastest rate hiking cycle on record,” Owen said.

It begs the question though, she said, “how is this possible?”

Net overseas migration

One driver of price increases, Owen said, was the increasing demand for housing due to a combination of returning overseas arrivals, and a drop off in overseas departures.

“Last year, departures from Australia were down about -25% on the pre-COVID average, while overseas arrivals ticked slightly higher on levels seen in 2019,” she said. “Combined with a persistently low average number of people per dwelling across the capital cities, this is pushing the need for housing higher, and may be contributing to more competitiveness for properties on the market, especially considering rental vacancy rates remain around record lows.”

Use of savings, profit, and equity

The continued increase in home values may also be explained by some draw-down in savings, equity, or profits from previous homeownership that is being used to buy properties, as opposed to securing more loans, Owen said, as ABS reported a fall in the value and volume of lending through June and July.

“However, it is uncertain how long households can draw on savings to support purchases,” she said. “ABS national accounts data shows the household saving ratio, which measures the ratio of net saving to net disposable income, has declined to 3.7% amid high inflation and debt costs. This is down from COVID-record highs of 23.6%.”

Constrained supply

Total listings volumes were still pretty low, despite the increase in new listings ahead of the spring selling season.

“In the four weeks ending September third, total listings across Australia were sitting at around 136,000, which is -23.4% lower than the previous five-year average,” Owen said.

Will prices continue to recover?

The housing market value remained highly uncertain, despite the consistent increase in housing values over the past six months, the CoreLogic economist said.

“While there is a growing expectation that the RBA board is done hiking the cash rate, borrowing remains constrained by a relatively high serviceability buffer,” Owen said. “APRA data to June showed the weighted average home loan assessment rate was just below 9%, and ABS housing lending data shows mortgage lending has fallen for three of the past four months.

“Economic performance is also set to unwind, and while this is good news for the inflation and cash rate trajectory, a rise in unemployment may create a higher degree of risk for mortgage serviceability. CoreLogic is expecting some heat could come out of the recent recovery trend toward the end of this year, while a more robust recovery in housing values will be limited until credit conditions loosen.”

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