Residz Team 3 min read
Many of us are feeling poorer right now, thanks to lettuces priced at $6.50, fuel over $2, rising energy prices, and being slugged $5 for a regular coffee. Yet new data from the Australian Bureau of Statistics (ABS) says householders are wealthier in 2022 than we were before the pandemic.
Wealth per capita has risen to a record high of $574,807 in the latest figures released by the ABS - but will it last?
In a press release, the ABS shows us that since March quarter 2020, household wealth has increased 35.3%.
It says the increase has been driven by asset prices appreciating, which resulted in wealth per capita increasing by $146,008.
In particular, residential property assets that some experts describe as overvalued continued to drive increases in household wealth, says the ABS, and this is contributing 1.4 percentage points to growth. Superannuation balances have also increased but most of the growth in household wealth since the start of the pandemic has been thanks to the rising values of residential property.
Katherine Keenan, head of finance and wealth at the ABS, said: “While the pace of property price growth started to moderate, with falls in Sydney and Melbourne this quarter, other capital cities and regional areas rose, resulting in an overall rise in house prices of 1.9 per cent nationally.”
As we know, in 2021 regional areas were growing dramatically faster in value than the rapidly cooling expensive suburbs in the big cities and this growth is continuing even with the interest rate rises.
SGS Economics and Planning data consultant Joseph Giang outlines in his recent article New data demonstrates how Australia’s population growth is responding to the pandemic that in 2020-21, population grew more in the regional areas of NSW, Victoria, South Australia, and Tasmania compared to their respective capital cities.
“Net internal migration increased significantly during the pandemic as city dwellers moved to regional areas,”
he writes.
“Prior to the pandemic in 2018-19, 3,500 people moved internally to Regional NSW; this increased to 18,000 in 2020-21. Meanwhile, in Melbourne, 9,900 people moved to Regional Victoria in 2018-19 which increased to 15,200 in 2020-21.”
All this money flowing into the regions from “flee-changers” has been driving up property prices, and as they continue to increase in value, it’s also driving up wealth per capita for all Australians.
According to Mr Giang, the “economic gravity” of the major cities is still strong, and that forecasts by the Centre for Population show that “net overseas migration and population growth are expected gradually bounce back over the next few years and return to pre-pandemic levels around 2025, illustrating that these impacts are only ‘temporary ’.”
Interest rates hold the key to how wealthy we will be in a year’s time. There are hopes for a soft landing - attempts by the Reserve Bank of Australia to raise interest rates by just enough to stop our economy from overheating while (at the same time) averting a severe downturn.
Westpac says a soft landing will allow the RBA to hold rates steady in 2023 and 2024 as inflation gradually eases back into the 2-3% target zone.
It says 90% of mortgage borrowers are directly exposed to moves in the RBA cash rate over the next year and a half. Around 60% of Australian mortgages are on floating rate terms with a further 75% of the remaining fixed rate loans set to mature by the end of 2023.
It’s hard to know where it will all settle, but Westpac says the RBA cash rate will affect borrowers and homeowners through multiple channels, including:
In other words, Australian householders may not be as wealthy (on paper) if interest rates keep rising.
However, it’s hard to know exactly where property values will settle. Bloomberg recently quoted ANZ’s bank prediction of a fall of only 6% in 2023.
“We…only expect a very shallow fall in housing prices, after a very intense increase, and that would really reduce the risk of consumption falling over.”
- Adelaide Timbrell, a senior economist at ANZ Banking Group Ltd, March 2022.
In the meantime, Australians are finding ways to save money on their mortgage, tightening their belts, and putting the lettuce back on the shelf.
If you’re considering purchasing or renting a house, make sure you download our free property report for that address. We have 12 million addresses in our database, with every report offering information on internet speeds, crime trends, bushfire risk, investability scores and a whole lot more.
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