Berry Blog

Record Household Wealth – What does this mean for the property market?

The Australia Bureau of Statistics has recently released some interesting figures about household wealth. The figures show the total household wealth has risen by 5.8% or $735 billion over the quarter which brings the total household wealth to a record high of $13.4 trillion. It is not surprising that rising property prices have been a significant reason for that as residential property assets grew by 4.5% in the quarter.

The next most significant increase was superannuation at 1.1% and followed by shares at 0.3%. This figure translates to an average of $522,032 of wealth per person.

Katherine Keenan, the head of Finance and Wealth at the Australian Bureau of Statistics, explained that residential property prices have recorded their strongest quarterly growth on record at 6.7% and demand for credit came to $78.6 billion which was a rise of $25.5 billion over the quarter and taking household borrowing to $45.1 billion. The demand for household credit was the strongest it has ever been since the quarter in June 2007, with most borrowers applying for home loans during the booming real estate market.

There was an $8.7 billion increase in unincorporated business loans and a $38 billion rise in housing loans which drove overall growth in household liabilities by 1.8% or $8.7 billion. The majority of borrowings for real estate were from owner-occupiers and was $31.9 billion of the borrowings whilst investors only accounted for $6 billion. The growth in owner-occupier loan balances was the strongest it has been in 5 years and deposit accounts with banks grew by $45.1 billion which is a 1.7% increase.

Although there are so many taking advantage of the real estate boom, the Reserve Bank is increasing its conversation and its warnings about the rising debt levels in Australia, which is a result of rising arrears of loan repayments and rising defaults on mortgages. It is not surprising APRA has recently increased the safety net for borrowers; meaning from 1 November there will be a requirement for borrowers to qualify on the basis of them being able to meet repayments on their loans should interest rates rise, as they forecast that they will be in the foreseeable future.

The real estate market here on the South Coast keeps going from strength to strength. All of this is happening as we are nearing the final weeks of the year in which there is typically a strong surge as people try to secure their real estate purchases before the Christmas/New Year break and now with restrictions easing and borders opening to interstate purchasers.