08/02/2022
The total value of the Australian housing market just ticked over $10 trillion. Compare that to the total market cap of $ASX which is only $2.6 Trillion. In 7 years time, we have effectively doubled the value of housing stock in Australia while population has only grown by 8%.
Over the course of 2021-22, we have seen a lift in inflation and not much growth in wages which is why housing affordability is at its lowest. Experts predict that the RBA would meet its inflation target by mid 2022 and would start increasing the official interest rate later this year.
This spells a very different period for the Australian housing market. We’ve had a period of ultra low interest rates and government policies/grants which has been a big driver for big gains; but as we start to tighten some these policies, prices start to unwind.
Doesn’t mean we go headlong into a nasty correction but it looks like some form of correction is overdue. I think the days of double digit gains are now behind us and we will be levelling out starting next quarter.
The key question is: What do you do with this information? If you had a bunch of equity locked into your home, what strategy could you put in place to protect that equity?
Your thoughts?