Self-interest is a powerful thing that’s best demonstrated at the ballot box. It sways elections and determines leaders.

Self-interest is not always bad, of course.

Defining what’s best for you and your loved ones is a reasonable strategy when making important decisions.

On the face of it, our self-interests might seem obvious – but it’s surprising how many people are oblivious as to what really is in their best self-interest.

A great example is the property industry.

Many who are rallying against stakeholders in the real estate sector seem unaware that a strong property market works in their favour too.

Here are my thoughts on why everybody should want our nation’s residential property market to thrive.

Impressive sector

Many of the commentators who’ve come out in favour of moves by financiers, regulators and politicians to stymie property price growth and slow down activity are under a misapprehension.

Most seem to believe real estate is all about property investors – and they’re sorely mistaken.

When you take the time to drill down and think beyond the political slogans, you’ll discover all Aussies rely on a robust property sector.

Let’s look at the numbers.

The market value of residential real estate in Australia is $7.5 trillion – yes… that’s trillion with a “t”.

In comparison, the value of superannuation in this country is $2.7 trillion, while listed stocks come in at $1.8 trillion.

What about commercial real estate? Well, that accounts for around $946 billion in value – impressive, but a far cry from its residential cousin.

And here’s the good news.

While residential property is of massive proportions, it’s not overleveraged. In fact, the debt against its $7.5 trillion value is just $1.8 trillion – or 24% LVR.

That’s a very resilient ratio by any standards.

It matters to all

As can be seen, residential real estate is a monster industry that underpins an enormous amount of wealth for average Aussies, but its impact reaches well beyond just property owners.

Let’s look at its ever-increasing circles of influence.

First up, you do have those who are directly affected by property prices.

They, buy, sell, trade, hold and develop property. This makes up a huge swathe of Australians – homeowners and investors alike.

Next, you have those who lease residential property – I’m talking renters of all sorts.

Whether it’s private tenants, or those under government assistance like low-income earners, pensioners or NDIS (National Disability Insurance Scheme) participants.

All of these tenants are impacted by the supply of available rental stock, and that supply is effected by the growth and returns available in the residential sector.

Now look further out again.

There are a huge number of businesses whose incomes rely directly or indirectly on the strength of residential property.

First up, think people like buying and selling agents, conveyancers, valuers, property managers, body corporate managers, investment advisors and so on.

But expand that reach. I’m talking painters, gardeners, plumbers, electricians and all sorts of construction and maintenance folk who need income from residential real estate.

Include in this government workers within property-related departments too.

The market’s strength effects other business as well, such as those who sell homewares and appliances, through people who import materials for retailers.

Everybody’s affected

For the sake of the argument, let’s pretend there’s a cohort of imaginary people who don’t own, rent or live in residential property and aren’t in a job that relies on this sector to generate income.

Surely, these economic unicorns are immune from the ups and downs of the market?

Sorry – but they aren’t because the strength of our property sector aligns firmly with the strength of our national economy.

If property prices tumble, for whatever reason, stakeholders tighten their purse strings.

And even ‘paper losses’ have an impact.

People don’t feel wealthy when house prices drop, so consumer confidence levels fall, which creates real-world implications for household spending.

Messing with this industry is like dropping a boulder into the still pond of economic serenity.

The waves from the surge will wash over those frontline stakeholders close to the epicentre first, but they won’t stop there.

They’ll continue to sweep through the rest of the economy, leaving financial stress in their wake before crashing on the shore. 

Residential real estate is an economic giant in Australia. It is one of the primary sources in the free flow of capital through this country’s fiscal veins.

My solution is simple.

Let’s put aside the ‘us vs. them’ mentality and look at the holistic benefits of a strong residential property market because, in the end, we’re all on the same team. 

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