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Household Net Worth Rises $20,000

7 June 2005

Household Net Worth Rises $20,000

The Spicers Household Savings Indicators shows rising house prices are continuing to increase the net wealth of households.

In the survey released today, the total net worth of households rose an estimated 3.2 percent or $11.4 billion in the March quarter, driven by a 4.1 percent increase in house prices.

Spicers Wealth Management Chief Economic Adviser Rozanna Wozniak says the annual rate of increase in net household wealth remained relatively unchanged at a strong 11.0 percent this quarter.

“In percentage terms household debt increased (up 3.9 percent in the quarter) faster than the rate of growth of assets (3.3 percent). In dollar terms the rate of increase of assets ($16.0 billion) easily outpaced debt ($4.7 billion).”

For the average household, the increase amounted to $20,000 in the year to 31 March 2005, taking the rise for the last three years to $75,000. This gain has been spread mainly amongst homeowners.

“Unfortunately, this perception of wealth may be a fool’s paradise for anyone looking for an excuse to keep spending and not put money aside for retirement,” Rozanna Wozniak says.

“An estimated 88 percent of housing is tied up in owner occupied homes and cannot be easily unlocked in retirement”.

Furthermore, there are strong reasons to believe that the pace of housing appreciation will continue to lose momentum. Consumers sometimes forget that housing is cyclical, and cyclical factors aren’t supportive at present.

The main trends evident in the March quarter Spicers Household Savings Indicators included:

The value of the housing stock increased 4.6% during the quarter, primarily driven by a 4.1% increase in house prices. Although almost 90% of new borrowing was classified as being for housing purposes, increasing a rapid 15.8% during the year to March, this is probably overstated. In fact, some of this includes people drawing down equity to fund consumer expenditure and some small business borrowing. Student loan debt increased an estimated 9.5% during the year. Financial net worth declined 0.8% during the quarter. Non-housing debt increased 3.9%, while the value of financial assets fell 0.2%.


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