Australian $10 trillion real estate market is larger than the GDP and ASX combined.

The real estate market in Australia has recovered and reached new heights.

The Australian real estate market is no longer in a slump. In fact, it has increased to $10 trillion in combined value, which was previously its all-time high.

For comparison, Australia's GDP (gross domestic product) is worth $2.6 trillion, and the ASX, the country's stock exchange, is worth roughly $2.3 trillion.

According to CoreLogic, the increase in overall value was caused by a combination of higher prices — the median home value in Australia reached $732,886 at the end of the month — and an increase in the number of housing units, which reached about 11 million.

Home prices started to recover in March of this year, and by the end of August, values had increased by 4.9%.

Between April 2022 and February 2023, during the previous downturn, national home values fell 9.1% from their peak to their trough, the recovery erased about half of that decline.

Why are home prices increasing when interest rates are skyrocketing?

According to CoreLogic, a number of factors may explain why home prices are still rising rapidly despite pressures from the cost of living.

1. More people are present

A rise in immigration and a decline in people leaving the country for other countries are driving up the demand for housing.

When compared to the pre-COVID average, Australian departures were down about 25% in 2018, but foreign arrivals were just a hair higher than in 2019.

In light of the fact that rental vacancy rates are still relatively low, this is increasing the demand for housing and could make it more difficult to find properties, according to CoreLogic.

2. Australians are drawing down their savings

People might be using profits from the sale of a valuable asset, equity from another property they own, or savings to make large purchases. But it might not continue.

"How long households can use savings to fund purchases is unknown. The household saving ratio, which gauges the proportion of nett savings to nett disposable income, has decreased to 3.7% amid high inflation and debt costs, according to ABS national accounts data. This is a decrease from COVID record highs of 23.6%, according to CoreLogic.

3. There are still not enough homes to accommodate everyone.

Even though the number of new listings has started to rise in the run-up to the spring selling season, the overall number of properties listed has remained relatively low.

Around 136,000 listings were available nationwide in the four weeks that ended on September 3; this represents a significant decrease of 23.4% from the five-year average.