We sure value our homes

Herald Sun - Property - - OPINION -

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

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