Property investors drive fall in household financial confidence

By Martin North, cross-posted from the Digital Finance Analytics Blog:

The latest edition of the Digital Finance Analytics Household Financial Security Confidence Index to end October shows households are feeling less secure about their finances than in September. The overall index fell from 97.5 to 96.9, and remains below the 100 neutral setting. We use data from our household surveys to calculate the index.

While households holding property for owner occupation remain on average above the neutral setting, property investors continue to slip further into negative territory, as higher mortgage rates bite, rental returns slide and capital growth in some of the major markets stalls.  Those property inactive households remain the most insecure however, so owning property in still a net positive in terms of financial security.

There are significant variations across the states. VIC households continue to lead the way in terms of financial confidence, and WA households are moving up from a low base score. However, households in NSW see their confidence eroded as prices slide in some post codes (the average small fall as reported does not represent the true variation on the ground – some western Sydney suburbs have fallen 5-10% in the past few months). Households in QLD and SA on average have held their position this month.

Confidence  continues to vary by age bands, although the average scores have drifted lower again. Younger households are consistently less confident, compared with older households, who tend to have smaller mortgages relative to income, and more equity in property and greater access to savings.

Looking in more detail at the FCI scorecard, 63% of household saw no change in their job prospects last month, while 19% felt less secure, especially in WA and SA.  Those with savings were a little less comfortable, reflecting both a net reduction in the amount saved (more households are raiding their savings to cover their costs of living) and lower interest rates on deposits.  Those with shares and other investments benefited from higher stock prices.

The burden of debt weighed heavy on many households with 42% of households less comfortable with their debt, a rise of 1.4% in the month. Some were concerned about potential interest rate rises, while others, especially those on interest only loans, were exercised by the prospect of having to refinance down the track.

More than half of households say their real incomes have fallen in the past year, and 67% said their costs of living have risen, up 4.1% from last month. Utility bills are higher, as are child care costs and school fees. We see more household relying on multiple part-time jobs to bring in sufficient income to pay the bills, and even then many are having to tap into savings to keep afloat.

We see little evidence of income growth in real terms, while credit growth continues at more than three time income. Given the recent slide in property values, and continued rises in living costs, we do not expect the index to move back into positive territory in the next few months.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 52,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

We will update the results again next month.


  1. Great charts, seems things have really been falling away over past 6 months for households. Not surprising, many struggling despite falling savings rates. Bunker down.

  2. The article about development sites dropping in value by minimum of 30% says it all. It would strongly suggest that condos and houses could not be too far behind that figure on average. That in turn means that not only most recent equity-mate has been wiped out but consequently, lenders will get ever more conservative with valuations and deposits…..”NEGATIVE LOOP” if you like. Funny how quickly greed turns into fear, ah?

    • Next is plane loads of people who came to get rich realising they won’t and going either home or to Canada (and telling their friends and relos at home to forget about Straya – possibly even more important).
      Sydney 9 million by mid-century? Only if there’s no recession between now and then.

      • Yeah, a recession will address this madness.
        I also agree that there will be a fair few deciding to move to Canada. And international students deciding to choose Canada over Australia for immigration reasons.

      • I have a theory immigrants don’t like cold, so I’m going to retire somewhere with a very cool climate.

  3. But we should all be feeling confident knowing the RBA has kept plenty of ammunition in reserve.

    Oh wait…

  4. And its just the very very tip of the iceberg coming into view. All ahead full !!!

    ”More than half of households say their real incomes have fallen in the past year, and 67% said their costs of living have risen, up 4.1% from last month. Utility bills are higher, as are child care costs and school fees. We see more household relying on multiple part-time jobs to bring in sufficient income to pay the bills, and even then many are having to tap into savings to keep afloat.”

  5. truthisfashionable

    If these people hit the exists they might be up the creek without a paddle.

    Corelogic final results for last weekend are 61.5% and 59.8% for Sydney.
    Some insight though into Sydney:
    Week / total auctions / cleared auctions / real clearance
    7oct / 818 / 440 / 54%
    14oct / 928 / 520 / 56%
    21oct / 823 / 451 / 55%
    28oct / 1215 / 633 / 52%
    4nov / 1232 / 632 / 51%

  6. There’s some very big Dyldam high riade developments up in Carlingford on Pennant Hills Road in Sydney’s North, people who know the area will know it, starts from the train station and goes all the way up the hill. – Multiple high rise buildings.
    My contacts tell me work has stopped.-this could mean the high rise buildings not already underway could be canned. I will take a look to see if there are labour crews and cement trucks still working today. When the cement truck deliveries stop you know there’s something wrong.

    • Same in Sydney CBD on the cnr of Bathurst and Pitt – the old Water Board Site. Action has slowed to a trickle after quite a number of months under construction. Am I glad I’m not holding one of them turkeys under my belt? Those poor suckers will probably lose their shirts if things fall out of bed completely.

    • Dyldam – dodgy leb builders!
      They have a site in Baulko near the Bull and Bush. I’ve heard work there has stopped too!

  7. The more property prices fall and interest rates rise, the more secure I feel about my personal finances and the more I spend into the economy.

  8. “Over the past five years, Chinese people have purchased Australian real property for the total value of AUD 50.9 billion (equals to RMB 252.1 billion), among which 72% of the investment (which is RMB 181.8 billion) happened during the two years from 1 July 2013 to 30 June 2015. Moreover, Credit Suisse expects Chinese buyers will purchase 20% of the new homes in Australia by 2020.”

    Mostly established residential dwellings.
    That is about 75,000 dwellings in just 5 years via the reported process, the real number (via black money or onshore proxies is twice that again.

    The estimated number of Australian dwellings now foreign owned and converted to house temporary or tourist visitors (2.6 million in total) in migrant slum share usage now exceeds 320,000 dwellings.
    (2.5 million / 8 in bunk & mattress share sub lets run as cash in hand migrant squats = 325,000 dwellings)

    The new Chinese capital controls will have little effect as the Chinese have well established mechanisms in aggregating money & laundering via third parties and onshore proxies.

    The nutrient is the temporary & tourist visa rackets.
    That’s the $35 billion cash in hand rental market these Chinese buy the property for – to fill up with bunks & partitions, cram 3 families or 8 to 10 illegally working ‘international students’ in, all paying cash, a false nominal rent declared & the remaining $1,500 a week taken as cash & the payment back to the criminal syndicates.

    Where do people think 2.6 million temporary & tourist visa holders all live ?
    1.3 million live in Sydney.
    1 million live in Melbourne. 300k elsewhere.
    98.5% live in ‘private shared accommodation (DHIA)
    They now exceed Australian renters in the two cities.

    =>Australian residential dwellings bought by laundered dirty black money to house illegally working temporary & tourist visa holders in Foreign owned sublet bunk & mattress share.

    To house Temporary & Tourist visa holders who are on pretext visas to steal Australian jobs, lower wages, corrupt our education as a visa pretext, pay little or no tax and now prevent Australian’s including new citizens in having access to affordable housing.

    =>Time to shut down the temporary & tourist visa rackets and destroy the Chinese & other foreign criminal syndicates labor trafficking & slumlord housing business model.