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The wealth of Australian households has risen for a sixth consecutive quarter, with residential land and house prices the largest contributor.
New data from the Australian Bureau of Statistics (ABS) has shown that household wealth rose for the sixth quarter in the three months to March 2024, increasing by 2.7 per cent or $431 billion, to $16.2 trillion.
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This is an increase of 10.2 per cent ($1.5 trillion) on March 2023.
Residential land and dwellings were the largest contributors to quarterly growth in household wealth, adding 1.3 percentage points.
As a proportion of net household wealth, residential property accounted for around 67.9 per cent.
Indeed, non-financial assets owned by households increased by 2.1 per cent ($239.2 billion), including a $200.5 billion rise in residential land and dwellings.
The ABS noted that house prices “continued to increase as supply is still unable to meet current demand”.
Dr Mish Tan, ABS head of finance statistics, said: “Rising asset values continued to drive growth in household wealth in the first quarter of 2024, with house prices continuing to increase.”
Household lending also rose over the quarter. The ABS noted that household liabilities increased by 1.5 per cent (or $44.3 billion), with the majority of this being home loans ($21.5 billion up).
The growth in housing loans was driven by both owner-occupied ($17.2 billion) and investor ($4.3 billion) loans.
Total demand for credit was $101.0 billion in the March quarter. This was driven by private non-financial businesses ($39.8 billion), households ($31.3 billion), state and local general government ($10.9 billion), and the Commonwealth government ($9.6 billion).
Meanwhile, financial assets of households increased by 3.3 per cent (or $236.6 billion), with a $145.2 billion rise in superannuation reserves, a $56.3 billion rise in shares and other equity, and a $32.0 billion rise in currency and deposits.
The increase in deposits was 7.1 per cent over the last year and was reportedly driven by a $11.2 billion increase in transferable deposits and $21.7 billion increase in non-transferable deposit accounts like savings and fixed-term deposits.
“Growth in household deposits since March quarter last year has slowed compared to the higher rate of growth seen from 2020 to 2022. This is consistent with the falling household saving ratio,” Tan said.
Total superannuation reserves increased by 3.9 per cent this quarter, driven by “favourable domestic and international sharemarket performance”, which increased the value of equities held by superannuation funds.
Noting the figures, Tim Keith, the managing director of private lender Capspace, said that households were “stockpiling their wealth in residential property” and emphasised that households may need to diversify into other asset classes to reduce financial risk.
“With such a large proportion of individual wealth tied up in property, it makes sense for investors to diversify into other asset classes, to lessen their risk of their wealth falling should residential property prices pull back on higher interest rates and any slowing in the economy,” Keith said.
“While property owners have benefited from property price rises, more defensive assets such as fixed income, and particularly private credit, can deliver more attractive yields than residential property and even fully-franked shares. That’s important because it is income-yielding assets that will support Australians in everyday living and in retirement.”
The Capspace MD suggested investing in private credit offered investors an attractive income stream and capital protection and better yields than residential property.
“That is one of the main reasons that Australia’s largest institutional investors are allocating more to private credit assets. AustralianSuper is one of the largest investors and has allocated over US$4.5 billion (A$7 billion) in private credit globally, with the stated ambition to triple its exposure in the coming years,” he said.
“Over time, I expect retail investors to follow the lead of Australia’s largest superannuation funds given the attractions of this asset class.”
[Related: Buyer sentiment nearing 40-year low]
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