Super sized Housing

Superannuation and housing are Australians' biggest assets. How do they compare in scale?

Sources:

• ABS residential property price indexes
• ABS managed funds

Housing-sized Super

• Sydney and Melbourne dominate the Australian housing market and thus Australian narratives around housing.
• The value of residential property has ballooned, but so has superannuation assets under management to the point where it's worth slightly more than Sydney housing stock.

The idea to compare the two asset classes came from a speculative conversation:

Hypothetical future AusGov want to raise revenue with a wealth tax (perhaps their credit is so shot they can't borrow anymore). What do they target? Super or housing?

I'd argue that federalism allows for both. Super is administered by the Commonwealth, real property by the states. The ATO could tweak concessional superannuation rates independently of the states adjusting stamp duty and land tax.

The trick is to co-ordinate so that there isn't a stampede from one asset to the other. Or maybe states and feds alternate so they take turns getting smashed at the polls by older Australians, who own more of both.

Super Housing Size

Housing has gotten big. I'm not repeating myself. I mean that literally.

From the ABS (2008):

Over the last 20 years, the cost of building a new [free standing] house has increased nearly fourfold. The increase can be partly explained by a 32.7% increase in the average size of new houses.

An annualised increase of 7.7% per year. Well above inflation.

This is also a U.S. phenomenon, with some noting that houses are getting nicer as well as bigger. 🏰

It seems like there is an island in every kitchen and granite on every counter. These things did not exist when I was growing up. What I remember were old wooden counters and walls all over the place. Open concept is the thing these days. There are no more walls.

Crown molding is now standard. Bathtubs are separate from the shower. Houses are turning into hotels.

This may not just be about lifestyle inflation, but also the type of dwelling constructed. Average floor space for new Australian dwellings (which includes free standing houses) has shrunk in the last decade (though still 2nd only to the U.S.). From CommBank:

The smaller home size reflects the increased building of apartments (around half of all new building is apartments). 

Apartments cost more to plan, engineer, and build than single-storey houses. (Check out this handy construction calculator.) So the extra new home cost may not be in luxuries like ducted air conditioning that previous generations forewent, but in less visible items specific to construction type, like extra reinforcement to ensure your apartment building or townhouse doesn't pancake and tip over.

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