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Average Aussie household now worth $400k

Nicki Bourlioufas  |  17 Jul 2018Text size  Decrease  Increase  |  
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"Tremendous gains" in the past five years have boosted the average Australian household's wealth to more than $400,000, putting them among the top ten of richest nations. 

On average, each Australian has net assets (assets less liabilities) of just over $410,000, an increase of $9000 over 12 months, according to a recent report authored by CommSec's chief economist, Craig James, and senior economist, Ryan Felsman. Over five years, per capita wealth is up by more than $100,000 – or 36 per cent.

"Looking ahead home prices are likely to ease further from record levels. The $64 question is whether gains on the share market will offset the reduced valuations of Australian homes. Per capita wealth may consolidate near $400,000 after tremendous gains over the past five years."

According to Felsman, there may not be a significant impact on net wealth even if property prices continue to fall, with any declines "limited to some, not all, capital cities".
“It is difficult to quantify whether share markets will lift enough to offset property declines in some cities. Not all cities are forecast to experience property price declines," he says.

Households held a record $1.11 trillion in cash and deposits at the end of March, representing 21.7 per cent of financial assets, down from 21.71 per cent in the December quarter but still just above the post global financial crisis (GFC) average of 21.16 per cent and the long-term average of 16.3 per cent, Felsman and James said.

Households held a record $939.3 billion in shares or 18.6 per cent of all financial assets.

Property dip takes toll on richer Australians

The total wealth of Australian high net worth individuals hit a new high in 2016-2017, but property price declines have taken a toll in 2018, according to a global report.

On a global measure, high net worth individuals' total wealth ballooned to $94.6 trillion globally in 2017. The gains are largely attributed to rising equity markets and improving economic growth, including in Australia, though a recent dip in property prices has eroded wealth in 2018.

The number of HNWIs in Australia grew 9 per cent between 2016-17 and 2015-16, leading several other developed nations, according to Capgemini’s World Wealth Report 2018. It defines HNWIs as those with US$1 million or more in investable assets – excluding primary residence, collectibles, consumables and consumer durables.

Growth in both the number of HNWIs and their total wealth was higher in 2016-17 than in the previous three years, the report finds. This was driven by Australia's rising equity market and increasing property prices, which were up 7.4 per cent over the year.

Across the globe, equities remained the most popular asset class in the first quarter of 2018, accounting for 30.9 per cent of HNWI financial wealth. This is followed by cash and cash equivalents at 27.2 per cent, and real estate at 16.8 per cent.

Largest HNWI populations 2016-2017

wealth HNWI high net worth rich cash

Source: Capgemini Financial Services Analysis, 2018

However, in Australia, most household wealth is held in property. Across all households, net worth fell to $10.22 trillion in the March 2018 quarter, down from $10.26 trillion in the September 2017 quarter, according to ABS data.

Net worth per capita declined to $410,708 in the March 2018 quarter, from $414,277 in the fourth quarter of 2017, as property prices dipped and household debt grew.

About 67 per cent of net Australian household wealth comprised $6.89 trillion of property assets and $5.05 trillion of financial assets such as cash, terms deposits and shares. In the March 2018 quarter, property assets fell in value to $6.89 trillion, from $6.91 trillion in December 2017.

Household liabilities was the largest contributor to declining household net worth, followed by land and dwellings losses. Households recorded $45.5 billion in real losses on their land and dwellings in the March 2018 quarter – the largest decline since September quarter 2012, according to ABS data.

But overall, Australian household wealth levels remain relatively high.

Wealth impressive on a global scale

A separate report from New World Wealth, the 2018 Global Wealth Migration Review, finds Australia’s high total wealth ranking is particularly impressive given its small population relative to many other developed nations.

The report ranks Australia ninth globally, with total wealth of US$6.14 trillion ($8.3 trillion) as at December 31, 2017. It shows the biggest national wealth inflows occurred in 2017, when 10,000 HNWIs (rounded to the nearest 1,000) migrated. This report defines HNWIs as those with net assets of at least US$1 million ($1.35 million).

"Growth [wealth] rates in Malta, Mauritius, New Zealand, Israel, Australia, USA, Luxembourg and Switzerland were all assisted by the ongoing migration of wealthy people to these countries," the report said.

The Capgemini report also found HNWIs are investing offshore, with the Australian cohort favouring the US and UK. Hong Kong is preferred by Chinese HNWIs, while Singapore attracts HNWI investments from Indonesia, India and Malaysia.

 

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Nicki Bourlioufas is a contributor for Morningstar Australia.

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

is a Morningstar contributor.

© 2019 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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