Earlier this week, the Australian Bureau of Statistics (ABS) released data showing that the total value of Australia’s dwelling stock hit a record high $10.4 trillion at the end of 2023:
Source: ABS
The average price of Australian dwellings also rose to $933,800.
Separate data released on Thursday by CoreLogic also showed that the total value of Australia’s real estate hit a record high $10.4 trillion, or $937,000 per dwelling, in February:
Source: CoreLogic
The inflated value of Australian homes is a key reason why Australia always ranks toward the top of Credit Suisse’s Global Wealth report:
Source: Credit Suisse
Credit Suisse shows that Australia’s wealth is highly concentrated in housing (non-financial):
Source: Credit Suisse
Is having so much wealth tied up in overpriced homes actually helpful to Australians?
Everyone needs a place to live, and expensive housing serves little benefit for the vast majority of owner-occupiers, who must sell and buy in the same market.
Expensive housing also punishes new entrants or those who are locked out of the market. The former are obligated to take out large mortgages and live a life of debt enslavement, whereas the latter are forced to rent.
Would Australia be worse off if the median house price was $385,000 instead of $770,000, aggregate mortgage debt was 70% of disposable income rather than 140%, and the banking sector was smaller and less profitable?
The answer is clear: no. Having less debt to repay would assist Australian households, and the broader economy would gain from productivity-boosting benefits such as lower land costs, more business lending, and a more balanced economy.
