Value of housing market hits $10.4 trillion as affordability pains persist

But while those in the market are riding the growth wave, the rising market reflects the growing affordability challenges for people yet to enter the market.

Data released by the Australian Bureau of Statistics on Tuesday showed the property market ended 2023 with a bang, with the total value of Australia's 11.1 million residential dwellings rising by almost $200 billion in the three months to December.

The total value of Australia's residential housing market has reached a new record high according to the ABS. Picture: Getty

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The total value of residential dwellings rose in all states and territories, with the average home price sitting at $933,800 nationally.

The figures reflect the growing divide between homeowners and aspiring home buyers, PropTrack senior economist Angus Moore said on the sidelines of REA Group’s inaugural Ready24 Conference in Sydney.

“It continues the trend that we’ve seen for a number of years, which is a lot home buyers - especially those who bought during the pandemic - have a lot of wealth that they are sitting on now as a result of the huge surge in prices we saw through the pandemic,” Mr Moore said.

“For some people that’s great news, it means they can upgrade sooner than they were planning or have more flexibility.    

“But obviously for new home buyers or potential homebuyers, it’s very challenging because prices have risen a lot."

Housing affordability is sitting at its worst level in at least three decades, according to PropTrack, with rising property prices outpacing the growth in wages.

“So it’s really tough for new home buyers at the moment," Mr Moore said.

It comes as home prices continued to marched higher in the early months of 2024, with the PropTrack Home Price Index reaccelerating in February to reach new peaks across the country.

Prices have risen 0.8% in the first two months of the year and sit 6.15% higher than a year ago, despite an influx of new property listings hitting the market.

And with interest rates expected to start falling later this year, the consensus among industry professionals at the REA Group Ready24 conference was that buyer demand would continue to keep pace throughout the year.

More than 1,200 real estate professionals gathered in Sydney for the event, sharing insights into the current environment and challenges for the year ahead.

Speaking with realestate.com.au on the sidelines of the event, BresicWhitney chief executive Thomas McGlynn said sellers were starting to get a little nervous, but remained cautiously optimistic.  

“The reason I say nervous is because there is more and more property coming onto the market and obviously when you’re selling your home, you’re in competition, you’re not in isolation.  

“So you have to think about what else is out there and so there is greater competition for other properties at the moment."

REA Group chief executive Owen Wilson (right) moderates a panel of industry leaders at the Ready24 conference in Sydney. Panelists from left: Dan White, Ray White Group; Sharmila Tsourdalakis, Stockland; Andy Kerr, NAB; Trina Jones, NSW Rental Commissioner.

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But as was seen throughout the 2021 pandemic boom, the catch-22 facing sellers in an extremely hot market is also being able to find a home to move into.

“I think a lot of sellers are still quite comfortable because it means that there are more opportunities for them to buy well," Mr McGlynn said.

“I think that the nerves quickly turn into thoughts of opportunity and that’s the contradiction that you find sometimes in the market because everyone becomes a buyer and everyone becomes a seller at some point. 

“Prices might not be as good as they were at certain points but there is a lot more choice in terms of what you can buy.” 

Supply shortage to drive smaller states

A significant supply-demand imbalance in Brisbane, Perth and Adelaide has seen total listing volumes fall more than 40% relative to the prior-decade average, according to PropTrack, driving prices sharply higher in these markets.

Adelaide has been one of the strongest property markets of the past year, behind Perth. Picture: Getty

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Adelaide-based Ouwens Casserly Real Estate managing director Nathan Casserly said homebuyers had been very buoyant off the back of a plateau in the market resulting from the recent interest rate rises and increasing living costs.  

“There’s a feeling from buyers that once those interest rates do drop at some stage, there’s probably the potential for significant uplift in the market place," he said.

“There’s probably some buyers who are waiting and hoping for the interest rates to drop that would look to come into the market place."

Buyers return in Melbourne

While Melbourne's property market has lagged behind many of its smaller rivals, predictions of an interest rate cut later this year is sparking a new wave of FOMO among buyers.

Melbourne-based Jellis Craig senior sales consultant Chloe Quinn said there were a high volume of people inspecting homes at the moment. 

“There’s definitely still competition, there may be situations where the competition isn’t there and there is a one buyer situation, so there’s a little bit of negotiation.  

“But I think we’re on the precipice of those interest rates coming down, as predicted, which means people are probably researching a lot.  

“There’s probably going to be more buyers later in the year, based on what I can see.” 

Originally published at https://www.realestate.com.au/news/value-of-housing-market-nears-10-4-trillion-as-affordability-pains-persist/