A closer look at the Australian real estate market

Australians love residential real estate, and that's no surprise. The Australian real estate market has experienced substantial growth over the last several decades, and a home is typically the largest financial asset a family will ever own, in addition to being a significant savings vehicle for retirement.

Given the importance of real estate to Australians, let’s take a closer look at the state of the Australian real estate market today.

The size and impact of the Australian real estate market

In 2016, Australian real estate experienced the greatest volume of new home building since the end of WWII, with the number of new housing starts across Australia rising by 2.7 per cent. There were 231,658 new homes built in 2016, and the value of that construction was $95.4 billion. The estimated total number of dwellings in the Commonwealth was 9.4 million, and beyond new construction, Australians spent another $32 billion on home renovations in 20161.

Understandably, all that residential construction and renovation has a significant impact on Australia's economy as a whole. In fact, residential construction represented roughly 6 percent of Australia's GDP in 2016, and state and local governments rely on taxes generated by housing to meet their budgets2. According to taxation data from the Australian Bureau of Statistics for 2015 -16 financial year, nearly $49.6 billion dollars3 was generated from property taxes nationally, which CoreLogic reports as constituting a historic high of 51.9 per cent of local and state government revenue4.

The Australian real estate market is also a major employer in the commonwealth. Construction is the fourth largest employment sector in Australia, employing nearly 9 per cent of the population. Moreover, the industry has added more than 82,000 jobs to its payroll between 2011 to 2016 — making it the fourth fastest-growing employer after health care, education and hospitality5.

But above and beyond the facts and figures, real estate satisfies a basic human need, namely to provide shelter and a place to call home.

Long-term trends in Australian housing prices

Inflation, supply and demand, industry deregulation and population growth have played a significant role in this substantial growth. In fact, Australia's population — currently estimated at 24.2 million — has grown 31.8 per cent in the last 20 years6.

Nationwide, median house price for a single detached home is currently pegged at $520,000, up 53 per cent in the past 10 years. Attached home median prices grew 50 per cent to $471,000 in the same period7.

What is the current state of the Australian real estate market (and where do we go from here?)

While Australian real estate has experienced unparalleled growth recently, most industry experts agree that a slowdown is likely for 20188. Home prices across the country have flattened — led by small drops in Sydney and Melbourne — seemingly weighed down by more stringent requirements for some lending practices, such as interest-only loans, investor financing and low-deposit mortgages9. Raising home loan rates and a dip in international investor activity are also contributing factors10. A softening market need not be bad, helping to bringing market equilibrium, and of course, presenting more opportunities for first-time homebuyers and for buyers at the lower end of the pricing spectrum.

Australians who have owned real estate for the long term have had the opportunity to build up significant equity in their home and investment properties during the recent boom. Accessing this wealth can be challenging, with many homeowners choosing to downsize or transfer this wealth to their children. For those with properties that have not been updated in some time, adding value with a well-planned renovation from both a lifestyle and investment perspective is always an option worth considering. 

This insight may contain general financial advice and was prepared without taking into account your objectives, financial situation or needs. Before acting on any advice, you should consider whether the advice is appropriate to you. Seeking professional personal advice is always highly recommended. Any forward looking statements are based on current expectations at the time of writing. No assurance can be given that such expectations will prove to be correct.

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Joshua Carney

Director, Private Client Services

As the Director, Private Client Services Josh leads the Private Client team and spearheads the business development, sales and growth of this client-focused service. Josh is responsible for seeking out new investment opportunities for clients and helping them to achieve their real estate investment objectives. This includes direct New York City real estate investment, and investment-focused design, architecture & renovation strategies in both New York and Australia.

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