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A record $57.5 billion of credit was borrowed by households in the June quarter, new statistics from the ABS have revealed.
The Australian Bureau of Statistics (ABS) has released the latest Australian National Accounts: Finance and Wealth, June 2024, which showed that households borrowed a record volume at the end of the 2024 financial year.
According to the data, total demand for credit was $97.9 billion, driven by a record $57.5 billion from households (surpassing the previous record set in June 2022, when household demand for credit was $52.6 billion).
Households borrowed $57.4 billion in long-term loans – namely, mortgages – and $269 million in short-term loans, according to the ABS.
Housing credit growth was in line with a rise in the value of new loan commitments, which reflected increases in average loan size and the volume of loans.
Moreover, household liabilities increased by 1.9 per cent to $58.3 billion in the June quarter, with a $35.6 billion rise in housing loans and a $0.5 billion fall in short-term loans.
The growth in mortgages was driven by increased demand from both owner-occupiers and investors.
Of the remaining total credit demand, private non-financial businesses accounted for $36.9 billion. This figure was partly offset by a $2.2 billion drop in demand for credit by general government.
Property accounts for 68% of household wealth
Overall, the ABS data showed that household wealth grew for the seventh consecutive quarter, rising by 1.5 per cent (or $250 billion) to $16.5 trillion in June 2024.
The ABS said that the increase in net worth was driven by “strength” in the housing market and that, when compared to June 2023, household wealth was up 9.3 per cent.
The value of residential land and dwellings is the leading contributor to growing household wealth – accounting for $249 billion of the $250 billion growth.
Dr Mish Tan, ABS head of finance statistics, said: “House prices have continued to rise across most states and territories, despite high interest rates. This largely reflects ongoing housing supply constraints and an uptick in investor activity over the quarter.”
“House prices keep rising as the current supply remains insufficient to meet increasing demand,” the ABS said in its report.
Indeed, property continues to be the dominant contributor to wealth in Australia.
Residential land and dwellings now account for more than two-thirds (around 68 per cent) of the assets held by Australian households.
A record $11.22 trillion of property assets were held by households in the June quarter, according to the ABS, and there was a $216 billion rise in residential land and dwellings in the quarter.
Households also held a record $3.94 trillion in superannuation assets, with this segment growing moderately by 0.3 per cent (or $13.7 billion) in the June quarter.
Speaking of the figures, the managing director of private lender Capspace, Tim Keith, said: “With almost 80 per cent of Australians’ household wealth tied up in low-yielding residential property and cash savings, it makes sense for investors to diversify into other asset classes to lessen the risk of their wealth falling should capital city residential property prices fall on any rise in unemployment or slowing economic growth.
“While property owners have benefited greatly from rising property prices in recent years, we are seeing weakness in house prices in Sydney and Melbourne in recent times, with auction clearance rates below year ago levels.
“Returns on cash too are falling. Both big and small banks have slashed term deposit rates following a global fall in market interest rates. Official data from the central bank reveals that the average interest rate on one-year term deposits fell to 4.3 per cent in August from 4.5 per cent in July, while the average advertised rate on three-year term deposits fell to 3.8 per cent from 3.95 per cent.
“Private credit, or non-bank lending to companies, offer investors an attractive and regular income stream and capital protection through stringent loan process, along with the security taken over borrower assets.
“That is one of the main reasons that Australia’s largest institutional investors like AustralianSuper are allocating more to private credit assets.”
[Related: House and land prices bolstering household wealth: ABS]
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