Australia’s property market has seen a remarkable resurgence, leaving behind the shadows of a recent downturn. In fact, it has surged to its previous all-time high, boasting a staggering combined value of $10 trillion.

To put this into perspective, the entire value of Australia’s Gross Domestic Product (GDP) stands at $2.6 trillion, while the Australian Securities Exchange (ASX) is valued at approximately $2.3 trillion.

This surge in overall value is the result of a combination of higher property values, with the median home value in Australia reaching an impressive $732,886 at the close of the month. Plus, there are about 11 million properties in the mix, according to CoreLogic.

This comeback has managed to wipe out nearly half of the previous slump that happened between April 2022 and February 2023 when home values dropped by 9.1%. But why are property prices going up when interest rates are through the roof?

CoreLogic has some theories:

Population boom: More people are calling Australia home, and fewer folks are packing their bags and leaving. Departures from Australia last year dropped by around 25% compared to pre-COVID averages, and arrivals from overseas have crept back up to 2019 levels. With more people, there’s a higher demand for housing, and that’s causing some fierce competition in the property market, especially since rental vacancies are super low.

Dipping into savings: Some people are digging into their savings, tapping into the equity from their other properties, or cashing in on previous property sales to make big purchases. But here’s the catch – we’re not sure how long this can last. Household savings, as per ABS national accounts data, have shrunk to 3.7% due to high inflation and debt costs. That’s a far cry from the massive 23.6% during the COVID pandemic.

Supply crunch: Even though new property listings are slowly on the rise in anticipation of the spring selling season, the total number of listings remains low. In the four weeks leading up to September 3, there were only about 136,000 listings across Australia, which is a massive 23.4% drop compared to the previous five-year average.

In a nutshell, despite concerns about rising interest rates and the cost of living, factors like population growth, people tapping into their savings, and a lingering housing shortage are fuelling this property market frenzy. However, whether this trend can keep up in the long run remains a big question mark.