A red hot real estate market has shattered nearly every record in the book as Australian property prices continue to defy gravity.
On Tuesday, new ABS figures quantified just how absurd recent price growth has become, documenting the impact of the three months to June.
Over the period, home values rose by an all-time record $596.4 billion, with the total market valuation swelling to an eye-watering $8.9 trillion. To put that in perspective, just one year ago, that figure was $7.2 trillion.
Breaking that down, the average Australian home is now selling for $835,700, having soared $52,600 in just 90 days.
It’s unsurprising such rapid-fire growth has completely left wage growth in its dust.
“Australia’s dwelling price-to-income ratio [has reached] a new high, increasing by 7.4% in the June quarter and exceeding its previous peak in December 2017,” Indeed Asia-Pacific chief economist Callam Pickering said. “It’s also 37% above its 2003 to 2014 average, reflecting the influence of much lower mortgage rates.”
“What the ratio is effectively saying is that it has never been more difficult to raise a deposit to purchase a property.”
ABS head of prices statistics Michelle Marquardt attributed the price pressure to “persistently low levels of stock” being immediately absorbed by strong demand, which in turn has been inflated by the abundance of cheap money.
“With the exception of Hobart and Darwin, capital cities continued to see house price rises outpace those of attached dwellings such as apartments and units, with price growth for both property types being driven by the upper segments of the market,” Marquardt said.
In capital cities, the average house price rose by 7.7% and unit prices by 4.3% between April and June. Canberra has led the trend higher, with prices rising 8.2%, the most quarterly growth on record in the Bush Capital.
In fact, most capital cities broke decade-long records. Hobart prices rose faster than at any time since 2003, and 2007 in Brisbane and Adelaide. In Melbourne, you’d have to go back to 2009 to find a bigger quarter, while Sydney hasn’t had a quarter like it in six years.
The average home now costs almost $1.1 million in New South Wales, $891,000 in Victoria and the ACT, and $835,000 nationwide.
Addressing the Anika Foundation on Tuesday, RBA Governor Philip Lowe said the positive wealth effect would help encourage households to spend and fuel the recovery in the coming months.
Yet he also acknowledged that there was growing concern that many Australians were being priced out entirely.
While record low interest rates haven’t helped, Lowe conceded, ultimately it was only federal and state government who were not only responsible but capable of addressing the affordability issue.