Household wealth has been pushed to record levels by the running hot property market, as the economy recovers from the slowdown
Despite the hundreds of thousands of Australians persisting through their unemployment, property prices are thriving, pushing household wealth to reach record levels, according to ABC News.
Australia’s residential property value bounced back by around AUD250 billion (USD190.9 billion) in the last three months of 2020. It followed a jump in property values of over AUD200 billion in the September quarter.
As stated by the Australian Bureau of Statistics (ABS), the total household wealth grew by AUD501 billion in the December quarter through a combination of rising property prices and recovery on stock markets.
Superannuation reserves were also recovered back above pre-pandemic levels via the recovery in stock markets in the last half of 2020, with an increase of AUD166 billion in the December quarter.
ABS officials said the surge in wealth for property owners can be attributed to the Reserve Bank’s expansionary monetary policy and government support for the housing sector.
Katherine Keenan, the head of finance and wealth at the ABS, said, “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.”
“The growth in residential assets was seen across both owner-occupier and investor housing in the December quarter. Owner-occupier housing loans grew 1.9 percent, which was the strongest growth seen in four years, while investor housing loans grew 0.4 percent, which was the first positive growth recorded in the past two years,” she added.
ABS data also showed that despite the jump in property prices, the housing-debt-to-income ratio decreased from 139.2 to 139 in the December quarter due to growth in household income (1.2 percent) being higher than housing debt (1 percent).
Income growth was driven by government income support packages such as JobKeeper and the Coronavirus Supplement that were implemented in response to the pandemic.
However, there are concerns about property prices as this record high has exceeded the peak reached in 2017.
Eliza Owen, CoreLogic’s head Australian research, said few people were selling and many buyers were scuttering for property, adding that “this is really a function of record-low mortgage rates, a very strong economic recovery and the fact that buyer demand is very strong against relatively low levels of stock.”
“We’d either need to see some more restrained lending conditions or higher levels of supply to really start to ease the growth that we’re seeing in the housing market at the moment,” said Owen.
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