The value of Australian housing is fast approaching the $9 trillion mark with the latest figures revealing the total value hit $8.8 trillion as at the end of July.

As a backdrop to that, Aussies still owe a grand total of $1.9 trillion on their homes – a loan to value ratio of just 22 per cent. That’s a low LVR – in fact, it surprised us!

Residential property is the biggest investment most Aussies have – the next biggest asset class is superannuation ($3.1 trillion) followed by the share market ($2.8 trillion) and commercial property ($978 billion).

Housing is far and away the biggest asset in dollar terms, and it’s also the place where most Australians tie up their wealth with 55 per cent of the typical Aussie’s household wealth held in housing, and 60 per cent of all bank loans in Australia for residential housing.

That’s why the Reserve Bank of Australia are ok with what’s happening in the housing market right now. House price growth – driven by owner-occupiers – is giving Australians much needed confidence in the COVID recovery.

The Housing Institute of Australia released its July report during the week which revealed the number of new house sales across Australia dropped by 20.5 per cent in July to 4,646 sales for the month. This comes off the back of 15 per cent increases in both May and June.

Since 2017 we have typically averaged around 5,000 new home sales per month, suggesting there is still a strong level of demand out there.

To put it in perspective, in the peak of the Homebuilder grant, we saw as many as 14,000 new home sales in a month! That’s why we’re hearing so much about pressure on supplies and trades today.

We think it’s probably a good thing that the house sales numbers normalise. We also think the clunky supply of new land is contributing to the monthly fluctuations in house sales, with most markets in Australia experiencing a shortage of registered land today.

On the topic of supply, the Australian Bureau of Statistics released its housing approval data during the week. In the 12 months to June 2021, house approvals hit an all-time high (20 per cent higher than the previous peak in 2018).

However, total dwelling approvals were down 8 per cent on their peak between 2016 and 2018.

Confused?

The difference between a dwelling and a house is that a dwelling covers houses, town homes and units. A house is literally a house on a block of land.

So, while total approvals are down across Australia compared with pre-pandemic levels, house approvals are well up.

On a State-by-State basis, all of the States’ total approvals were down between 10 and 20 per cent against their peaks in the last decade, however approvals of houses in every single State reached a decade high.

In other words, the ‘tree change’ we often speak about is very real.

At the other end of the spectrum, the established housing market is also feeling the pinch. In the three months to July, CoreLogic estimated there were around 171,100 sales throughout Australia. That’s about 50 per cent more sales than what we would typically see at this time of year.

During the same period, there were just 121,200 newly advertised properties for sale. That means the ‘sales to new listings ratio’ now sits at 1.4 – effectively, 1.4 homes are selling for every 1 home that gets advertised for sale… For the past decade, the ratio has averaged 0.9, which means there is a lot more buyers than sellers out there right now.

Leading the charge seems to be Brisbane. In the three months to July, Brisbane properties took on average just 24 days to sell, compared with 46 days during the same period in 2020, CoreLogic found.

Many Custodians have saved a lot of money by sharpening their interest rates in the past 12 months. We’ve discussed the ‘loyalty tax’ in previous posts – the average borrower is being charged 0.5 per cent more than their bank is charging a new customer.

It seems that now a lot of homeowners have been cottoning on to this and taking their loans elsewhere. In the month of June, the number of people refinancing was double the same time last year.

There are now 20 lenders in Australia offering rates below 2 per cent and between $1,000 and $5,000 on offer as a cash incentive for borrowers to bring their business across.

To put that in perspective, a $1 million principal and interest borrower on the average variable rate of 3.07 per cent who refinanced to the lowest two-year fixed rate (1.79 per cent) could save you up to $25,057 in two years – plus whatever cash incentive you manage to get!

It makes a huge difference, particularly for investors who have multiple properties and loans.

If you want to know more about how you can make the most of everything that’s happening at the moment, join us on our webinar on 1 September.

Interested in knowing more? Check out the weekly podcast we do at The Double Shot Podcast.

James and Alex