Property boom drives record increase in household wealth

A few months back, the Credit Suisse Global Wealth Report declared Australian households the worlds richest thanks to their expensive property assets:

Global wealth

Aussies top global wealth rankings.

Yesterday, the ABS has released its Finance and Wealth statistics for the June quarter, which revealed a record increase in household wealth on the back of the property boom:

Total household wealth increased 5.8 per cent ($735.0b) in the June quarter 2021 reaching a record $13,433.7b, according to figures released today by the Australian Bureau of Statistics (ABS). Wealth per capita rose to a record high of $522,032.

Residential property assets contributed 4.5 percentage points to the quarterly growth in household wealth, followed by superannuation balances and directly held shares, at 1.1 and 0.3 percentage points.

Head of Finance and Wealth at the ABS, Katherine Keenan said: “Growth in household wealth continued to be driven by residential property prices, which recorded the strongest quarterly growth on record (6.7 per cent). The strong property price growth reflected record low interest rates, rising consumer confidence and demand being greater than the levels of housing stock on the market”…

In fact, when divided by Australia’s estimated resident population, Australia’s dwelling stock owned by households was worth a record $330,600 per head of population in the June quarter, up from the 2019 trough of $252,800 in real inflation-adjusted terms:

Per capita value of Australia's housing stock

My view is that having so much wealth locked up in housing is useless. We all need somewhere to live and higher home values serve little purpose to the vast majority of owner-occupiers, who typically must sell and buy into the same market.

Expensive housing also punishes those who have recently entered, or are yet to enter, the housing market. These people are required to either take-out mega-mortgages and have a life of debt slavery, or miss-out altogether.

Would Australians really be worse-off if the median capital city dwelling price was $375,000 instead of $750,000, mortgage debt was 70% of disposable incomes instead of 140%, and the banking sector was smaller and less profitable?

The answer is obviously no. Lower debt loads would make Australian households better-off, whereas the broader economy would benefit from the productivity-boosting effects of lower land prices, increased business lending (investment), and a more balanced economy.

Unconventional Economist

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