Australians get richer as property boom surges – but risks are building

Australians in 2025 became, on the whole, richer.

Rising property prices, with an added boost from superannuation, contributed to total household wealth rising by 2.5 per cent ($453.7 billion) in the December quarter 2025, according to new figures released by the Australian Bureau of Statistics (ABS).

The value of residential land and dwellings rose 3.2 per cent ($368.6 billion). This translated into 2 percentage points being added to the growth in household wealth, while superannuation assets contributed 0.3 percentage points.

Dr Mish Tan, Head of Finance Statistics, ABS, said that while overall wealth was lifting, increased borrowings were suppressing those gains.

“Rising house prices continued to be the main driver of growth in household wealth in the December quarter.

“The mean price of residential dwellings was up 2.7 per cent in the December quarter 2025, with strong growth seen in Western Australia, Queensland and South Australia.’

“Household borrowing grew 2.0 per cent, or $64.2 billion, reducing the overall growth in household wealth by 0.3 percentage points.”

Australia is among the world’s wealthiest nations, ranking second globally in median wealth per adult at approximately A$385,600 (trailing only Luxembourg). 

Given the importance of property prices in making Australians richer, how feasible is it that this trend will continue its upwards trajectory.

In terms of growth in 2026, much depends on how the war in Iran and the Middle East pans out in terms of economic ramifications and duration.

Income, superannuation and share portfolios are reliant on a buoyant jobs market.

As interest rates climb higher, so too does the unemployment level.

There are already signs of joblessness taking a turn for the worse. Unemployment in Australia has risen in early 2026, with the seasonally adjusted rate climbing to 4.3 per cent in February from 4.1 per cent in January.

Unemployment rises when interest rates go up because higher borrowing costs slow economic activity. Increased rates reduce consumer spending and business investment, forcing companies to cut costs, halt expansion, and reduce hiring to manage lower demand, which ultimately leads to job losses.

If the country runs out of fuel, jobs and economic mojo in the face of an extended blockade of the Strait of Hormuz, then even the seemingly unstoppable juggernaut that is the property market may take a hit.

Property demand strong - but susceptible?

For now, the continued surge of property investors in the market suggests the appetite for property is not waning, which drives values – and national wealth levels – higher.

Speaking to API Magazine, REA Group Senior Economic Analyst Megan Lieu shared her expectations around whether this high volume of investor loans could continue as interest rates move upwards and expectations of a capital gains tax discount reduction in the May federal budget solidify.

“We expect investor activity to slow following the two recent interest rate hikes and further increases anticipated for 2026.

“A capital gains tax discount reduction will also disincentivise property purchases from investors due to lower post-tax returns, especially for those focused on equity gains.

“While investor demand is likely to soften as a result of these combined factors, the constrained rental market and strong demand from renters is expected to support ongoing investor interest.”

The spectre of a prolonged Middle East conflict that was supposedly going to be over in the time it takes to sell a home in Clarence Gardens (three days), is weighing on the RBA Board’s collective mindset.

Christopher Kent, RBA Assistant Governor (Financial Markets), said the effects of the sharp reduction in the global supply of oil, natural gas and other commodities are already apparent across financial markets. 

“These changes – and heightened geopolitical and economic uncertainty globally – have led to some tightening in financial conditions. All else equal, that implies a decline in short-run neutral rates here and offshore – that is, a tighter stance of monetary policy for a given cash rate,” he said at a speech he delivered in Sydney on Thursday (26 March).

By that, he means interest rates will go up.

“The supply shock also poses a risk to inflation and longer term inflation expectations at a time when there are ongoing capacity pressures in Australia and several other advanced economies.

“Indeed, financial market participants have revised up their expectations of monetary policy rates in Australia and most advanced economies (see graph).

“The increase in Australia since the start of the conflict shown in orange has been less than some other advanced economies but it also came after an earlier increase shown in blue (reflecting relatively strong domestic data) that was not seen elsewhere.”

Meaning, our interest rates are going up quicker than elsewhere.

“The longer the conflict persists, the larger the economic impact will be, and the greater the risk of a material repricing of assets.”

Meaning, property prices might actually fall.

“A negative supply shock pushes up prices and leads to weaker economic activity, making us all poorer. Central banks cannot change that, but they can ensure that the initial rise in prices does not lead to a rise in longer term inflationary expectations and extended inflationary pressures.”

Property keeps pumping up national wealth

For the first time in 15 years, more than 90 per cent of house resales in every capital city have turned a profit, according to Domain’s latest Profit and Loss Report. These persistent and widespread gains are driving a wave of upgrades and intergenerational wealth transfers, in turn sustaining strong demand and price growth in the property market. 

This accumulated wealth is acting as a financial shield for a significant proportion of the population, while first-home buyers and recent entrants to the market continue to face affordability hurdles and interest rate uncertainty.

And what about those who are yet to get a taste of the wealth-engine of property ownership?

Are all those investors locking out first home buyers? Yes and no says Ms Lieu.

“There has been an increase in investor loans over the past year as a result of a strong rental market demand and a limited supply of rentals.

“Despite owner-occupier loans rising less than investor loans, they grew by 14 per cent over the same period and are 22 per cent higher than December 2023.

“While loans to investors now make up 40 per cent of total new loans, 60 per cent are still attributed to owner-occupiers. They account for the majority of new lending overall. 

“In the lower segments of the market where investors and first home buyers compete, there may be increased pressure, however, the updates to the Australian Government 5 per cent Deposit Scheme and introduction of the Australian Government Help to Buy Scheme are showing early signs of counterbalancing this.

“Non-first home buyer owner occupiers tend to be upgraders who are looking in mid to high segments of the market that are less affected by growing investor activity.”

The extraordinary capital growth in Australia’s property market is moving into homeowners’ pockets at unprecedented levels as more households turn a profit.

Domain’s Chief of Research and Economics, Dr Nicola Powell, agreed the game was very much skewed towards those already in the property arena.

“As homeowners stay put for longer, they are seeing their equity build up over multiple price cycles and this widespread profitability has given many Australians a strong financial safety net and access to continue to ‘climb the ladder’, while providing a buffer against pressures such as rising interest rates and inflation.

 “However, the sheer size of these profits is creating a wider gap between established owners and those attempting to enter the market, making it increasingly difficult for younger Australians to buy property without the support of intergenerational wealth.

“With record median profits in many of our cities and regions, the barrier to entry is increasingly defined by existing family equity, rather than individual savings alone.”

So will Australians keep getting richer? For those with property, possibly – if the world doesn’t lurch further towards chaos.

For those without property? Maybe – if they can get on the ladder or load up the super’.