Boom in household wealth driven by Aussies’ love of property
Household wealth has hit $17.3 trillion for the first time, capping off a stellar five-year period and led higher by one key asset class.
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Australians’ personal wealth has surged more than 57 per cent higher in just five years, powering past the pandemic on the back of rising real estate values and strong super gains.
New Australian Bureau of Statistics numbers show household net worth hit $17.3 trillion in the March quarter, rising from $16.2 trillion a year ago and up from $11 trillion in early 2020.
Property assets make up the lion’s share of household wealth, climbing 5.9 per cent or $652bn in the 12-month period to $11.7 trillion.
However, property’s annual growth was weaker than other asset classes as Melbourne houses prices remained weak and record-breaking run-ups in several other cities slowed. Superannuation, households’ second-biggest asset, increased 6.6 per cent to $4.14 trillion, while shares and other equities rose 8 per cent to $1.57 trillion and cash climbed 8.1 per cent to $1.87 trillion.
CommSec chief economist Ryan Felsman said the March quarter wealth growth was the weakest since September 2022.
“We have seen a slowdown in annualised growth rates for national home values,” he said.
“Brisbane, Adelaide and Perth have slowed down from those record gains that they experienced last year.”
However, Mr Felsman said he expected stronger share markets since April and a pick-up in house prices following Reserve Bank interest rate cuts should push wealth higher for the current June quarter.
Covid-19 seems to have been a only slight hiccup in the long march higher for Australians’ household wealth, which was dented by fear and uncertainty in March and April 2020 before recovering quickly.
Separate data from regulator APRA shows superannuation assets have grown strongly from $2.73 trillion since March 2020, despite the former Morrison government allowing people to withdraw up to $20,000 each from their super during the first year of the pandemic.
Mr Felsman said share markets in Australia and overseas rebounded strongly from their Covid collapse, “and you saw a big run-up in property prices following concerns around lockdowns”.
He said the Commonwealth Bank was forecasting single-digit growth for property prices this year, as “we have seen affordability issues impact the strongest growth markets”.
“Expectations of two or three more rate cuts this year could see home prices start to lift again if affordability improves.”
The new ABS figures show despite its relative weakness, the annual growth in land and dwelling values was more than every other form of household wealth combined, and property has grown faster than the overall wealth increase since 2020.
While real estate remains the cornerstone of wealth for Australians, superannuation is starting to catch up, said MBA Financial Strategists director Darren James.
“There used to be a bigger gap between what was someone’s biggest asset after property,” he said.
“There’s 12 per cent now going into super from the Superannuation Guarantee – five years ago it was a fair bit less than that – and people are contributing more.”
Mr James said he had noticed clients enjoying sharp rises in wealth since the pandemic, but other people still battled.
“There’s people who have struggled through the period, and the cost of living is hitting different people differently,” he said.
Mr James said the pandemic delivered Australians cheap interest rates, a strong share market recovery and “property prices that went silly as people worked from home”.
“And we have very low unemployment – everyone’s got a job,” he said.
“The next generation is starting to see some of this wealth come through from property, as people are downsizing or moving into aged care.
“We are starting to see a lot of private equity funds and wealth managers entering the Australian market because they can see this intergenerational transfer of wealth is pretty big in Australia.”
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Originally published as Boom in household wealth driven by Aussies’ love of property
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