The total value of Australian housing today sits at a casual $11.6 trillion, while the total value of debt owed against this housing is just $2.4 trillion. That works out to be a loan to value ratio of 20.6 per cent. 

What this means is that if Australian housing were a person, that person would be the banks favourite customer.

Now, just to put all of this in context, please note the following important detail: 

–    One third of Australians own their home outright.
–    One third own their home with a mortgage; and 
–    One third of homes owned by investors (some with a mortgage, some not).

As it stands, the media treat every RBA decision like it’s the Super Bowl of housing, but the fact of the matter is that interest rates don’t have as significant a bearing on housing demand even though the media might have you believe that.

What does have a bearing is housing supply and by this, I mean new builds and listings.

Unless you’ve been living under a rock, you’d be aware we aren’t building enough homes. 

Here is the scoreboard for listings:

–    In the past 12 months, 526,747 homes were sold (about 1 in every 21).
–    That’s pretty much on par with the five-year average.
–    But right now, only 121,113 houses are listed for sale.
–    That’s 19% below the five-year average.

In other words, the buyers are there, but the listings aren’t.

Just ask my friend who’s trying to buy. Every time I ask how the search is going, they sound like a contestant on a reality show: “There’s just not much around!” And they’re right.

This is the great paradox of the housing market: people won’t sell because they’re scared they can’t find something else to buy. Which means fewer listings. Which makes it harder to buy. Which … well, you get the idea.

Now, consider whether falling interest rates provider sellers a bit more confidence to list? Sure, it does. But it will also give buyers more confidence to buy.

Interest rates are just one piece of the puzzle. My advice is to watch the rates and their movement, but don’t obsess over them. There is no relationship between interest rates and house values. There are other bits of information to consider, much of it more important than interest rates.

The number of listings and new builds chief amongst them and they paint a clear picture today – not enough supply.