While 2012 was difficult year for most of us – particularly those interested in property – it finished off with some good news. Household wealth climbed 18.4 per cent last year to $69,422 per person, making us the wealthiest we’ve been in five years.
BY MICHAEL YARDNEY
One of the interesting aspects of the rise in wealth is that it wasn’t driven by rising asset prices, but by people saving more. Rather than spending, Australians have been stashing their cash. Many have reduced their credit card debts, while others have taken advantage of low interest rates to pay off more of their mortgage.
Not only have house prices bottomed, but there has also been a strong wealth effect for households from rising stock prices on the stockmarket.
Interestingly the Reserve Bank of Australia (RBA) recently reported that a measure of household net debt fell significantly over the past five years. A paper by the RBA reported that total debt as a share of household disposable income stayed roughly flat in the past five years after growing sharply in the early 2000s.
But they found that this was increasingly balanced by holdings of interest-bearing assets such as term deposits at banks.
Net debt measured by total debt minus these assets fell from 42 per cent in 2006 to 35 per cent in 2012. Much of this wealth is held in superannuation accounts.
While the world’s problems have not disappeared, in general we finished the year better than we started it.
The property market seems to have bottomed with recent reports from RP Data, Australian Property Monitors, Residex and others all confirming higher house prices over the course of 2012.
Confidence is rising and in turn this means many Australians will ramp up their borrowings again and get into the property market this year.
Overall I see 2013 as being better year than 2012, but not as good as 2014 will be.
Michael Yardney is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He is best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.