Australian Property Market

Housing is the single most valuable asset

owned by the

majority of Australian households


“Housing is the most important asset owned by the majority of Australian households. It is a large component of household wealth and serves a unique, dual role as an investment vehicle and a durable good from which consumption services are derived. With most mortgages and many small business loans secured against residential dwellings in Australia, housing also forms an important part of the collateral backing the financial sector’s balance sheet.”

RBA Long-run Trends in Housing Prices Oct 15

The critical fact to remember is that there is no one, single, ‘Australian Property Market’ – different states, suburbs and housing types travel at different speeds depending on the prevailing economic conditions, demographic changes, income levels, supply constraints, and government incentives to name just a few influences.


Currently, the depth of the market and volatility risks impacting the housing market as a result of the COVID-19 pandemic is yet to be fully realised or quantified. So far, prices have been resilient. Not all, but two of the worst impacted sectors, hospitality and retail, have workers and students who would have a direct and sudden effect on rental demand leading to an oversupply and downward pressure on achievable rents. Vacancy rates in both inner-city Sydney and Melbourne have increased, and it’s thought to be because students with casual hospitality jobs have been forced to exit the market.

The financial and legislative support put in place by the Federal and State Governments are not only welfare measures for those most vulnerable but also designed to limit harm to the property market.

The Reserve Bank provides Snapshots of key economic indicators, and it’s worth noting that despite the expectations of negative economic growth, volatility in financial markets and flagging business incomes, housing is to date, holding up better than expected. Australians are typically faithful payers of debt and our banks, for the most part, take their fiduciary responsibilities seriously, and so their credit assessments are conservative and responsible. Consequently, non-performing loans are still low at 1% but being realistic and uncertain as to how long the restrictions will stay in place, there is the expectation that they may rise.

Overall, housing risks are rated low, with only 3% in negative equity, a situation where the property is worth less than the outstanding debt.

Social distancing rules have changed the outlook for commercial property. With any significant upheaval to conduct and expectations, the eventual return to normal will come with some lasting consequences. The workforce has been forced to learn and adapt quickly and to become ‘digitalised’. Change is stressful, no doubt, but there will also be measurable efficiency and productivity gains. (greater flexibility and adaptability in the labour market is a supply-side generator of productivity gains and reduced costs) and management will be reassessing their need for expensive office space. It’s also hard to imagine that their successful and resilient work patterns haven’t bolstered the bargaining power of employees seeking flexible work arrangements over the last few months.

The diverse impacts, varying in degree, is again a reminder that the concept of a single property market is a misrepresentation and an oversimplification of a mechanism with many moving and complicated parts.






Housing and the Economy

The housing market has a pervasive impact on the Australian economy. It is the popular topic of any number of conversations around barbeques and dinner tables. It generates reams of newspaper stories and reality TV shows. You could be forgiven for thinking that the housing market is the Australian economy.[1] That is not the case. But at the same time, developments in the housing market, both the established market and housing construction, have a broader impact than the simple numbers would suggest