Thursday 31st March 2022
Aussie wealth surges to fresh high as asset values soar
Australians are the richest they have ever been, with household wealth jumping to a record $14.68 trillion in the December quarter of 2021, a rise of 4.5 per cent from the September quarter, while wealth per capita increased to an all-time high of $566,541, according to data from the Australian Bureau of Statistics (ABS).
Almost two-thirds of household wealth or 61% was made up of property assets, which struck a record high $9.01 trillion, compared to $1.23 trillion held in shares, $1.47 trillion in cash deposits and $3.70 trillion in superannuation assets.
Head of Finance and Wealth at the ABS, Katherine Keenan said: “Residential property prices continued to drive increases in household wealth, contributing 3.5 percentage points to the quarterly growth in household wealth. Prices increased 4.7 per cent during the quarter, reflecting record low interest rates, labour market recovery, and strong demand for housing.”
Increases in superannuation balances, and currency and deposits, contributed a further 0.7 and 0.3 percentage points respectively. Offsetting these was an increase in household loans which detracted 0.4 percentage points from growth.
“The contribution of superannuation to household wealth reflected the recovery in the labour market, as well as the increase of the superannuation guarantee from 9.5 to 10 per cent from 1 July 2021,” said Keenan.
Property and share prices jumped during the December quarter, and through the pandemic, due primarily to record low interest rates. As many as 2 million Australians are considered millionaires today, with that number expected to go grow to 3.1 million by 2025, according to forecasts by CommSec.
Lockdowns too forced Australians to save in the third and fourth quarters of 2021. Commonwealth Bank economists estimate that Australians amassed around $230 billion in extra savings during 2021 lockdowns, enabling those ‘stuck-at-home’ to invest in value adding assets such as property and shares.
Debts jumps on property activity
The rise in Australian household assets outstripped growth in debts. Household liabilities rose 2.2 per cent or $58.3 billion to a record $2.58 trillion in the December quarter, boosted by a rise in housing loans of $48.1 billion. The growth in housing loans is the strongest since June quarter 2016 as property values jumped. The increase was mainly driven by owner-occupier loans, which rose $34.3 billion. Investor loans rose $7.5 billion, the fifth consecutive quarter of positive growth, the ABS said.
SQM Research managing director Louis Christopher said the national housing market remains buoyant despite the threat of higher interest rates. “Overall, supply remains below long-term averages and we are still recording capital city rises in asking prices. Yes, there is a slowdown occurring in some of our capital cities, however, it is proving to be a soft landing at this stage,” he says.
At the same time, rents are rising as vacancy rates continue to tighten in capital cities which is expected to draw more investors to the property market, adding fuel to the inflation rate.
“We can expect capital city rents to rise by over 10 per cent in 2022. As it stands, the current rent rises represent the largest increase since the 1970s and so there are major near terms ramifications for inflation. Housing is the highest weighted group in the CPI, accounting for around 23 per cent of the basket,” said Mr Christopher.
Nicki is an experienced journalist writing across The Inside Investor and The Inside Adviser.
