We sure value our homes
LOVE it or loathe it, housing is our Australian economy.
House prices are booming, prices are slumping, are we living in a housing market bubble, record prices being paid, auction clearance rates rocketing or plummeting, buyers lose out, sellers are desperate — these are all terms we are familiar with in the highs and lows of our property market.
I empathise, especially if you are a struggling first-home buyer feeling outpriced or a hardworking family just wanting a decent home that you can actually afford, because here I am talking about the great Australian dream of home ownership still being the keystone for our modern economy.
This clearly is very much still the case according to research analysis undertaken by CoreLogic and published in this month’s Housing Market and Economic Update.
The headline statistics are simply the fact that the money invested in residential real estate across Australia doesn’t just surpass its nearest competitor — it wallops it by nearly three times.
Our wealth in housing equates to $6.4 trillion; runner-up is superannuation at $2.3 trillion, followed by Australian listed stocks at $1.6 trillion and finally commercial real estate at $0.7 trillion.
Just in case you weren’t sure, I had to check too: one trillion is equal to one million million. Therefore residential real estate wealth in good oldfashioned numbers is equal to $6,400,000,000,000.
This considerable sum and the fact it is so obviously ahead of all other major forms of wealth almost justifies our nation’s fascination with the topic.
That’s no consolation for those who don’t own property, but perhaps it affirms why we are a nation obsessed.
A further factor that this compelling research brings to light is how a typical household’s individual wealth is actually composed.
The breakdown shows 52.1 per cent of a household’s wealth is the equity in their home — now that could be any amount large or small. Superannuation again is the next major player at 21 per cent, which probably comes as no surprise. What I did find revealing in this research relates to the composition of household wealth; in 2015, placed at just over 50 per cent is the wealth in residential real estate. Going back 10 years to 2005, that figure has hardly changed.
All the way back 25 years ago in 1990 it is actually quite surprising that the percentage figure seems to remain at a constant 50 per cent.
Over that last quarter of a century, those of you who can recall, we’ve seen incredible highs and lows, booms and busts; house prices can fluctuate all over the place with times of doom and times of elation for sellers and buyers.
Yet across all that volatility, all those market conditions and external influences, the share of household wealth in our homes has stayed a constant.
This has certainly illustrated nothing particularly new other than that the old adage our home is our castle is perhaps just as true today as it was over many, many decades.
In my opinion, it is that fundamental factor that protects house values in a country like Australia.
I’m sure there will be another far more formally educated expert that will endeavour to argue this point and dispense words of pending doom. But modern history has shown us that while the humble Aussie home or unit or townhouse might fluctuate in value and there are periods of lows, the periods of gain allowing for sufficient time will repair that loss, might even turn a profit given a sufficient duration and you the homeowner’s patience.
If housing and property ownership is not for you, and it isn’t for everyone, I apologise on behalf of homeowners across the land, but perhaps you can see why the obsession continues.
Andrew Winter hosts
on the Lifestyle Channel