Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Saturday, 19 December 2015

Household wealth per capital hits record $356,000

Share markets clonked

As further confirmed by the Finance & Wealth data for September, 2015 is rapidly shaping up to be a poor year for share market wealth. 

The value of household financial assets fell by $90 billion in the third quarter, with superannuation balances copping a hiding to the tune of $89 billion driven by an ugly $122 billion decrease in the value of assets held in the listed equities market. 

There will be more where that came from in the fourth quarter. Ouch!

Record household wealth

Despite this, mainly thanks to solid quarterly gains in the value of land and dwellings of $112 billion, household wealth increased for the 16th consecutive quarter by a total of $71 billion or 0.8 per cent to a fresh high of $8,849 billion. 

Household wealth per capita thus surged to a record $355,894 in the September quarter, making Australian households amongst the world's wealthiest on current measures. At the nadir following the financial crisis average household wealth per capita had temporarily slipped below $250,000.

Debt and gearing

The ABS reported that the ratio of interest payable to income has continued to decline from 16.4 per cent at the June 2008 peak to only 9.4 per cent, the lowest level since 2003.

I already generated these figures and looked at this data here last week.

With the interest repayment burden effectively having fallen by more than 40 per cent from its peak as a percentage of household income, housing bears will be hoping to see rising unemployment to cause defaults (although at the national leve; unemployment has been declining through 2015).

Outstanding lending to households related to housing increased by 8 per cent over the past year to $1.56 trillion, although the aggregate value of all residential land and dwellings owned by households increased at a faster pace of closer to 12 per cent to more than $5.5 trillion. 

The ratio of mortgage debt to the value of residential land and dwellings therefore continued to decline in the third quarter to 28 per cent.

Finally, households held a record $956 billion in cash and deposits at the end of the third quarter, further evidence that sensible buffers are being created.