What do house wealth increases mean for the property market?

Overall, total household wealth increased 1.5 per cent, a partial reversal of the March quarter 2.5 per cent fall.

Head of finance and wealth at the ABS Amanda Seneviratne said: “The June quarter 2020 financial accounts reflect the recovery of the Australian and international financial markets as the economic impacts of COVID-19 became more evident, and government and RBA policies took effect.”

According to PRD’s chief economist, Diaswati Mardiasmo, while much of the fall in wealth was reflected in property prices, she points to a stronger market moving forward.

“There is good news on the horizon, however. A 1.5 per cent rise in household wealth suggests that there is pent-up demand for spending in the market, which has the potential to translate to real estate enquiries and transactions,” Ms Mardiasmo said. 

Already, many real estate agents, particularly those located in outer metropolitan and regional areas, have reported an unprecedented number of sales in July onwards, with buyers coming from within the local area as well as outside investment.

Ms Mardiasmo also points to low interest rates as a tailwind for the property market, with the RBA unlikely to increase rates until the country is near full employment. 

“This is unlikely in the near future, meaning that many households will be able to continue to take advantage of historical low standard variable loans,” she said.

The economist is predicting a strong bounce in property trading by the end of the year. 

“The real estate market is already well-equipped in responding to any restrictions imposed due to COVID-19. Further easing of restrictions, combined with a conducive environment of grants and lending practices, will propel real estate activity in the last quarter of 2020,” Ms Mardiasmo concluded.

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