Feeling wealthy? Thank the booming property market

November 12, 2025 — 4.00pm

There is nothing quite like a strong rise in the price of housing to increase our feeling of prosperity, drive consumer confidence and lift spending.

And as we head into a Christmas spending period we are hitting the “wealth effect” sweet spot – which will be good news for companies selling discretionary goods and services.

Inflation has eased along with interest rates while house prices, share values and our superannuation are all growing at a pace.

The ASX200 share market index has grown 7.6 per cent over the past six months, but it is house price growth that is lifting the spirits of many consumers.

House price growth is making owners wealthy.Credit: Joe Armao

It is the way to make money, exertion free.

At least for the two-thirds that have a foothold in the property market. For others, including younger generations struggling to afford a home, the property market’s growth spurt only widens the gap between the haves and the have-nots.

Australia’s home value growth hit the fastest pace in over two years as national dwelling values surged 1.1 per cent in October, marking the strongest monthly gain since June 2023 and pushing the annual growth rate to 6.1 per cent.

Real Estate data group Cotality says this clear upturn has been gathering momentum since the first rate cut in February, confirming a new cycle of growth.

The general bullishness around property prices is evident, despite consumer expectations that interest rates are unlikely to fall further in this cycle. Cotality adds that the swift value rises mean capital city median home values have already offset any improvement in affordability that came from lower interest rates, for a household with a typical income.

Loading

Investors are also contributing to the demand for housing and pushing up prices. Investor loan growth jumped to 7.3 per cent in the year to September, the fastest annual pace since 2015.

Around 80 per cent of consumers expect house prices to rise over the next 12 months, according to Westpac.

Meanwhile, being wealthier on paper doesn’t provide more spending money, but it makes us feel more prosperous and generates what economists call the “wealth effect”.

And it increases our level of spending.

Australian household wealth has jumped by 43 per cent since the pandemic – outstripping the 34 per cent increase in household income over the period. (Over the past five years national house prices have risen 47 per cent).

The wealth effect plays out differently in our decisions to buy certain goods, according to a JP Morgan report titled The House Always Wins which finds that travel, health and clothing are the three biggest beneficiaries from feeling wealthier. In contrast, it says vehicle purchases, financial services and spending on recreation receive less of a bump from rising wealth. And spending patterns on essential goods like food, don’t tend to change in response to consumers feeling wealthier.

It is notable that consumer confidence has surged between October and November, according to the Westpac–Melbourne Institute Consumer Sentiment Index, released earlier this week.

It is the first positive reading since early 2022.

Domestically, there are clearer signs that a recovery is gaining momentum, especially around consumer demand and housing markets, according to Westpac economist Matthew Hassan.

Consumers are also feeling a little bit more comfortable about external threats like the US trade war thanks to a recent de-escalation in China-US trade tensions.

And they appear to be less concerned about a stronger than expected recent inflation reading.

So the combination of positivity about the domestic economy, the taming of concerns about the international economy and strong house prices appear to have combined to boost sentiment. With six weeks until Christmas, it’s off to the shops.

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.

Most Viewed in Business

Loading