People who talk to us about home loans at Smartline Rockingham often hear so much conflicting information that they don’t know where to turn. One month, home prices are “booming.” The next month, they’re “slumping.” People are paying record prices for houses while interest rates are at all time record lows.
If you are someone looking for their first home, it can all be quite confusing and discouraging. Sometimes, it’s enough to make working people think they will never be able to afford to buy their first homes.
But despite all the confusion and all the ups and downs of the property market, the CoreLogic Housing Market and Economic Update for February 2016 makes one thing abundantly clear: Australians still view homeownership as the Great Australian Dream. The study looked at Australian household wealth for 2015.
The amount of Australian money invested in the residential property sector is a staggering $6.4 trillion. That is nearly three times as much as the second highest amount of Australian investment: superannuation, listed at $2.3 trillion. Australian listed stocks are third at $1.6 trillion, while commercial real estate is worth a cumulative $0.7 trillion.
What do these numbers mean? They mean that we all still want to own a home. For us at Smartline Rockingham, it means we work as hard as we can every day to help as many people buy their first homes or “buy up” to larger homes.
When this is broken down into the average household, 52.1% of their wealth is the equity they have in their home. Their supers account for 21% of their wealth.
So how does that 52.1% compare to years gone by? In 2005, Australian wealth invested in residential real estate was just over 50% In 1995, the number was just over 50%. Are you seeing a pattern yet?
In the last 30 years, we have seen an incredible amount of highs and lows. There was the Global Financial Crisis (GFC). There was the mining boom in WA. There have been historically high (17.5% RBA cash rate) and historically low (2.0% RBA cash rate) interest rates. Housing prices have risen steadily overall but have also dropped steeply a few times.
But through all of the fluctuations, the highs and lows, the booms and busts, the amount of wealth Australians hold in their homes has stayed steady around 50%. This raises an interesting question: why do Australians still have the majority of their wealth in their homes despite wildly changing market conditions over all segments of the economy?
Housing is its Own Economical Buffer
Although many economists can cite all sorts of complicated factors and graphs to “explain” why we still store so much of our wealth in our homes, we think the main factor is that a home is its own economical “buffer.” This means that no matter how bad things get, if you can hold onto your home, it always takes care of you.
For example, according to Real Estate Institute of Western Australia (REIWA) statistics: since 1993, the median price of a home has fallen four times: 1990, 1991, 2008 and 2015. The longest prices have fallen since 1993 is two years. They have always recovered quickly enough for homeowners and investors to get their money back. All they had to do was hold onto their homes during the rough patches.
Since we all have to have a place to live, holding onto your home and waiting out hard times is a foregone conclusion for most.
For Home Loans and Other Financial Needs…
If you are thinking about buying a home or you want to refinance your current home, talk to a mortgage broker at Smartline Rockingham today. We have access to 28 different lenders and a lot of experience with all of them. We don’t just send your application to every lender out there; we use our knowledge to determine which lenders and home loans are right for your individual financial situation.
To learn more or to enquire about a home loan, call Smartline Rockingham today: (08) 9527 1800.