Australia’s housing market is now worth $8.1 trillion – that’s more than super, the stock market and commercial real estate combined

  • Australia’s housing market hit $8.1 trillion in value last month, surpassing the combined values of listed shares, superannuation, and commercial real estate by $1 trillion.
  • Market analysts CoreLogic state home prices spiked 6.8% in the three months to April 2021.
  • But the Reserve Bank of Australia maintains other policy levers should be pulled to lower house prices before lifting record-low interest rates.
  • Visit Business Insider Australia’s homepage for more stories.

The value of Australia’s residential market rocketed to $8.1 trillion in April, surpassing the combined value of the nation’s publicly listed stocks, superannuation holdings, and commercial real estate by a cool $1 trillion.

New data from analysts CoreLogic shows the nation’s home prices spiked by 6.8% in the three months to April, buoyed by pent-up demand, rock-bottom interest rates, and government subsidies driving investment into new homes.

Sydney led the appreciation race, with an 8.1% uptick in home prices over the quarter, while Perth and Darwin are the only capital cities to not post record-high median housing prices.

Nationwide, Corelogic reports median house prices climbed 7.8% from April 2020 levels, emerging from the pandemic’s early economic chaos to reach unbelievable new heights.

That’s just dandy for Australia’s home owners, and the growing value of residential property meant just 1.3% of mortgages were underwater at the start of 2021.

But it’s a different story for those locked out of the housing market, who, in every city but Melbourne, are also experiencing a gradual uptick in rents.

“For many Australians looking to get a foot on the property ladder, the continued strength in the market is putting home ownership further out of reach despite record low mortgage rates,” Eliza Owen, CoreLogic head of research, said in a statement.

“Wages growth simply isn’t keeping pace.”

As prices rise, the Reserve Bank focuses on wage growth

Sluggish wage growth remains a key concern for the Reserve Bank of Australia, which used a Thursday conference call to reiterate its long-standing position: a material uptick in take-home pay is needed before they reconsider the historically low 0.1 percent interest rate.

The RBA is well aware that nudging interest rates upwards would slow the record-high value of new home loans, curtailing the rampant rise in home prices.

Even so, RBA deputy governor Guy Debelle reportedly said other policy levers could be pulled to arrest runaway house prices before touching the interest rate.

Pointing to the broad benefits of low interest rates after an unprecedented economic crisis, Debelle added that “unemployment would definitely be materially higher without the monetary stimulus.”

That isn’t to say the RBA is ignoring how interest rates have pumped up the market.

Announcing that interest rates will remain at 0.1% on Tuesday, RBA Governor Philip Lowe reiterated the institution is keeping an eye on potentially risky lending.

“Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained,” Lowe said.

There are early signs a housing price slowdown is already happening, even without interest tweaks.

CoreLogic itself notes the growing gap between house prices and wages suggests fewer people will be able to sign on the bottom line — even with rock-bottom interest rates.

For now, life is grand for those who already hold some of that $8.1 trillion valuation, and less impressive for those trying to crack into the nation’s housing market.