House price boom drives Australian household wealth to new record high

author-avatar By on March 25, 2021
House price boom drives Australian household wealth to new record high

 

 

Australian household wealth has hit a record, driven by surging property prices.

Australian Bureau of Statistics (ABS) data released today shows household wealth in Australia also hit the highest quarterly growth rate recorded since the December quarter 2009.

Household wealth rose by 4.3% ($501.5 billion) in the December 2020 quarter to a record high of $12,033.5 billion.

Average household wealth increased 4.2% ($19,028) to $467,709 per person. 

The increase was mainly attributed to a 2.2% surge in residential assets, followed by a 1.4% increase in superannuation balances and a 0.5% rise in shares.

"The December quarter growth in household wealth was driven by rising residential property prices, reflecting record low interest rates, support through government programs such as the First Home Buyer and the HomeBuilder schemes, and pent up demand from buyers," ABS Head of Finance and Wealth Katherine Keenan said. 

Household wealth increased by 7.0% throughout the year.

Residential assets surged by 7.7% with rising property prices contributing 6.1%.

“The growth in residential assets was seen across both owner-occupier and investor housing in the December quarter," Ms Keenan said.

"Owner-occupier housing loans grew 1.9%, which was the strongest growth seen in four years, while investor housing loans grew 0.4%, which was the first positive growth recorded in the past two years.”

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner-occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 23, 2021. View disclaimer.

It comes after forecasts from big four bank ANZ of a 17% house price rise in 2021, the most bullish forecast to date.

"The strength in sentiment is putting upward pressure on prices, with low stock levels adding to the fear of missing out (FOMO) sentiment emerging in the market.gains of around 17% across the capital cities (up from 9% previously) in 2021," ANZ senior economist Felicity Emmet said.

Fellow big four lenders Commonwealth Bank and Westpac predicted 8% and 10% price increases this year respectively. 

If house prices continue on their upwards trajectory, Ms Emmet said the Australian Prudential Regulation Authority (APRA) may need to step in.

"By June we expect prices to be rising at a more moderate pace given the end of government programs like JobKeeper and HomeBuilder, and a lift in fixed mortgage rates," she said. 

"By year end though, we expect the regulators will step in with macroprudential controls to address the overheating market, with the exact measures likely to be dependent on how the market develops over the next six months or so." 

Bank of Mum and Dad among top 10 mortgage lenders

With soaring property prices making it harder for first time buyers to enter the market, more are relying on their parents to help them enter the market.

New research from Digital Finance Analytics (DFA) has found that around 20% of first home buyers are getting help from their parents, with parental contributions averaging $75,000.

What's more, the research found the total amount lent by the bank of mum and dad is approaching $30 billion, which is more than HSBC, AMP, Heritage Bank and Bank of Queensland have in loans. 

While using the bank of mum and dad can help first home buyers fast track their way into the property market, it's not without its risks.

One of the biggest risks for guarantors is potentially losing their property if the borrower can't meet the repayments anymore.

Principal of DFA Martin North warns the first five years are the riskiest time for guarantors.

“You’re twice as likely to default in the first five years if you got help from mum and dad and never got into the savings mindset,” Mr North said.

See also: Australia's property boom: 'Sobering' decisions facing first time buyers


Photo by Nicolas Gonzalez on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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