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An analysis of data released by the Reserve Bank of Australia has revealed that household and housing debt to disposable income is continuing to soar.
According to CoreLogic RP Data, new figures from the RBA show that the ratios of household and housing debt to disposable incomes are at “historic highs” of 186.3 per cent and 133.8 per cent respectively, with the ratios increasing by 3.4 per cent and 4.3 per cent over the past year.
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CoreLogic RP Data research analyst Cameron Kusher said despite the figures revealing that households have significant debt, the value of assets they hold is substantial.
Mr Kusher said the ratio of household assets to disposable income is the highest it has ever been at 862.8 per cent, while the ratio of housing assets to disposable income is 471.3 per cent.
“What is interesting is that the ratio of household assets to disposable income is still lower than its previous peak in December 2007 at 476.2 per cent, however, it is nudging back up towards its previous record high,” he said.
“The value of household assets is significantly greater than the value of the debt. Based on this data, the ratio of household debt to assets is 21.6 per cent and the ratio of housing debt to housing assets is 28.4 per cent.”
Mr Kusher said it’s important to note that these results take a national view.
“Across different regions the ratios are likely to be substantially different,” he said.
“Furthermore, lower interest rates and a fairly strong labour market over recent decades have contributed to a willingness to borrow. Should either of these factors change, it could lead to a dramatic deterioration in the value of these assets while of course the debt would remain.
“Importantly, mortgage arrears remain low and the Reserve Bank has reported that the typical mortgage holder is currently more than two years ahead on their mortgage repayments. This coupled with higher rates of household savings provide a potential buffer if unemployment were to rise sharply or interest rates began to increase.”
[Related: Home buyers lose confidence]
