Aussies: The world’s richest

ScreenHunter_19 Oct. 09 13.38

By Leith van Onselen

Credit Suisse has today released its 2013 Global Wealth Report, which reveals that Australian households are the wealthiest in the world when measured by median wealth. From the Age:

The median wealth of adult Australians stands at $US219,505 ($233,504) – the highest level in the world, according to the Credit Suisse 2013 Global Wealth Report, released on Wednesday…

Credit Suisse chief investment strategist, Australia, David McDonald said the nation’s household wealth per adult grew by 2.6 per cent in the past year. That was slower than the global average of 4.6 per cent, but Australia still had the best distribution of wealth among developed nations…

Australians were shown to have a much higher level of wealth held in property and non-financial assets – 58.5 per cent compared to the world average of 45 per cent and just 38 per cent in the US.

I am not surprised by this outcome. One of the “benefits” of having one of the most expensive housing markets in the world is that it inflates the value of household wealth. Australians along with their Kiwi cousins also have a particularly high exposures to property and a low share of wealth stored in liquid financial assets (see below IMF charts).

Housing Wealth
Household Financial Wealth
Household Net Wealth

But is having the lion’s share of one’s wealth stored in illiquid housing really all that beneficial? We all need somewhere to live and higher home values serves little purpose to the vast majority of owner-occupiers, who typically must sell and buy into the same market.

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Comments

    • I fully expect this article to be brought up in comment sections as proof of real estate fundamentals.

      “Australian’s can afford higher house prices because we’re the wealthiest in the world thanks to high house prices.”

      A religion indeed.

  1. “Australians were shown to have a much higher level of wealth held in property and non-financial assets – 58.5 per cent compared to the world average of 45 per cent and just 38 per cent in the US.”

    Mean reversion is a bitch.

  2. So first we had a real estate bubble, now we have bubble wealth built on real estate. Credit Susie has no credibility.

    • Dylan Grice from Societe Generale described Australia as “a credit bubble built on a commodity market built on an even bigger Chinese credit bubble.”

  3. wasabinatorMEMBER

    It’s not PPoR, it’s PPoI in the mindset of the knuckleheads in Aus: Primary Place of Investment.

  4. Free_Market_Delusion

    How much longer can it all continue for is the question on my mind.

    I just can’t see how it can but geeze I have been proven wrong for quite a while now.

    Mind you only a fool predicts the top of any market.

  5. Free_Market_Delusion

    On a side note I have noticed many of the regular contributors have not contributed for some time?

    • Could it be that they are too busy shorting banks and other financials to write a deeply analyzed article here?

      • DarkMatterMEMBER

        “Could it be that they are too busy shorting banks and other financials to write a deeply analyzed article here?”

        dumpling, I think many of the posters here would be offended by the notion that they frequent sites like this for the cynical and self serving intent of gaming the system.

        Most of the posts on MB seem to strive towards encouraging a more enlightened view of our economy and society as opposed to the soulless money grubbing so popular in the mainstream media.

        The fundamental problem with idea that you “play the hand your dealt and take your profit where you can” is that it implies that the financial system is not under our control and is effectively “an act of God”. If our most financially educated and knowledgable members of society seek out advantage from an inherently dysfunctional system, what future is there for the rest of society?

        The deeply troubling issue with free market religion is this:- if the people most able to build a fair, efficient economy can unashamedly extract advantage from economic dysfunction, how can we entrust them with the stewardship of our financial future?

      • @Dark matter

        You must have realized that most of my posts are about “what is likely to occur” / “what the likely driving force of a known event is”/ “what the reality is”, NOT about “what should occur”. I doubt many people are interested in the latter. After all, you can look that kind of stuff up elsewhere.

        I am not interested in discussing ethics (or ideology/doctrine/dogma). Money is a dirty thing after all. If you want to discuss ethics, I can spare 5 minutes for you; Is it ethically acceptable for parents to have kids without recognizing that they are part of the global overpopulation problem? How about first home buyers who buy houses without recognizing that they are part of the rising house price problems? How about drivers who drive their cars without passengers? How about …. I can go on and on, but the point is that I am sure that different people have different sets of ethical standards and act accordingly.

        We have a legal system to take care of the matter as to what is socially acceptable and what is not. If you do not want to rely on the rule of law, and want to set a separate ethical standard which should apply to more than one individual, you should make the following 3 points clear; (1) who is going to set the standard, (2) who is going to oversee/enforce the standard, (3) how it is going to be overseen/enforced.

        As for my share trading, I do not see anything wrong about letting the market come to me so as to enable me make money. Or, let me put it this way; I would not mind swapping some of my shares to a house at a conversion ratio which I deem fair……

      • DarkMatterMEMBER

        I am having trouble following the logic of your response. If you wish to discuss ethics, 5 minutes may be an inadequate timeframe in your case.

        If you think that most people who contribute to this site are not interested in “what should occur”, you may wish to go back and re read some of the posts. If there was one way to categorize this site, it would be that there are many very well informed posters who have given a great deal of thought to our economic and political situation and have ideas about what might be a better future. Otherwise, they would be better off hanging out on “Property Investor” with like-minded “investors”.

        If you truly believe that we have a legal system to take care of the matter as to what is socially acceptable and what is not, then may I respectfully suggest that you may need to extensively review your value system.

        Now dumpling, I hesitate to approach this delicate topic, but I am becoming concerned for your spiritual well being. You do seem to have an odd disaffection with parents who have too many children – and an unnatural dislike for drivers with no passengers. Combine this with a peculiar affection towards the legal profession and ….

        Have you considered an exorcism?

      • @Dark matter

        I already stated that I am not interested in discussing ethics. It is impossible to draw a line anyway.

        I visit this site to find new ideas, not to discuss ethics/ideology/dogma/doctrine. I do not know how long you have been visiting the MB site, but the MB site is supposed to be about “No nonsense analysis of the Australian and global economy and the effects on your assets and business”. My in-depth posts in the past were aligned to this theme.

  6. Can’t pay for education. Can’t pay for books, music or anything of the sort. Can’t afford to travel, even if just in one’s own state.
    Content to aspire to cleaning jobs on a mine site as FIFO worker.

    But……have a $$$$$ house with a $$$$$ mortgage plus $$$$ IP with $$$$ mortgage. I’m RICH!!!!!!!

  7. Call this hubris a leading indicator…..

    Back in 2007, the Irish political class were making great hay around the notion that the average Patlander was richer than the average Luxembourger.

    We all know how that worked out…..

    • http://www.independent.ie/irish-news/ireland-is-rated-sixth-richest-country-in-global-wealth-league-26283779.html

      21 January 2007

      IRELAND is now the richest non-oil country in the world, apart from the small financial hubs. With the exception of world financial centres like Liechtenstein and Bermuda and the oil kingdoms of Norway and Qatar, Ireland is now the world’s richest country with an average income of €44,000.

      The Standard & Poor’s agency ratings show Ireland lying in sixth position for the second year in a row, easily beating the likes of the US and the UK, who took 11th and 18th places respectively. Ireland’s average income has risen from €39,335 last year to a new high of €44,000. The increase in wealth is reflected in spending both on property and on the high street.

      • It’s eerie isn’t it.

        “Personal disposable income in Ireland has doubled over the past 10 years, and is forecast to double again over the next decade.
        The annual level of personal savings stood at €10 billion at the end of 2005 and this is forecast to increase to €13.5 billion by 2010 and to €24 billion by 2015.
        Debt as a percentage of disposable income has increased from 89 per cent to 140 per cent in the last five years.
        But Mr O’Sullivan said that neither the absolute level of borrowing nor borrowing levels relative to overall wealth were ahead of international norms.”

        Australians loading up on debt to speculate on house prices cannot say they didn’t get a shot across the bow. It’s all trading now – who will get out in time and who will be left holding a highly illiquid asset when we pitch off the capex cliff.

  8. So basically if property falls by 50%, as it should, median wealth will be negative 😀
    And that’s why it won’t be allowed to fall, even if it destroys us. Which it will LOL

  9. Adam Smith had it worked out in 1776 (“The Wealth of Nations”). Houses are NOT “wealth”, PRODUCTIVE CAPITAL IS WEALTH. “Dwelling places” are merely a necessary expense like clothing – they just take longer to wear out than clothing.

    What the ……. have OUR so-called “experts” LEARNED in all those fandangled degree courses they’ve spent years in?

    Full quote from Adam Smith HERE:

    http://www.macrobusiness.com.au/2012/04/melbournes-enormous-property-over-supply/#comment-142944

    • houses are not wealth, especially this kind that we have here, not worth much
      land on the other hand…