Housing prices in Australia boost household wealth to records
Household wealth jumped 4.5 percent to record $11T in the fourth quarter
Soaring real estate prices Down Under are driving wealth over the top.
Property values pushed Australian wealth to a record in the last quarter, while net worth per person also hit an all-time high, Bloomberg reported. Household wealth climbed 4.5 percent to $11 trillion, the Australian Bureau of Statistics said. Home values contributed 3.5 percentage points to the quarterly increase, and demand for credit was also the strongest on record at $40.8 billion.
Record-low borrowing costs and government incentives during the pandemic helped push prices higher. Fiscal and monetary support for households and firms through lockdowns inflated asset prices across the wider economy.
That resulted in higher consumer spending, which accounts for more than half of the nation’s $1.65 trillion annual output.
“Residential property prices continued to drive increases in household wealth,” said Katherine Keenan, head of finance and wealth at the Australian Bureau of Statistics.
“Prices increased 4.7 percent during the quarter, reflecting record low interest rates, labor market recovery, and strong demand for housing.”
Higher pension fund balances, driven by bumper job growth, also boosted households’ net worth, she said.
Approvals to build new homes jumped 43.5 percent in February, driven by private houses and apartments.
Property prices are expected to cool as the Reserve Bank of Australia, which held interest rates at 0.1 percent since November 2020, tightens monetary policy. Economists expect the first rate hike in August.
ANZ Banking Group says the nation’s home prices may drop 6 percent in 2023.
“The excess savings that many households have gained will really help them to keep their consumption up during periods of high inflation and higher interest rates, even if home prices do fall,” said Adelaide Timbrell, a senior economist at ANZ. “We also only expect a very shallow fall in housing prices, after a very intense increase, and that would really reduce the risk of consumption falling over.”
[Bloomberg] – Dana Bartholomew