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Australian households climb the investment property ladder at record levels

There’s more of us investing than ever before.property ladder house market investor climb grow wealth first home buyer

The latest St.George-Melbourne Institute Household conditions index shows the biggest increase for Aussie homeowners investing in property in over a decade.

The quarterly St.George-Melbourne Institute Household Financial Conditions Report reveals how household savings directed towards property lifted to 25.9 per cent during the September quarter – the highest level since the index began in March 2001.

Conversely, while deposits are still popular, their popularity has declined over the year to September 2015, most likely due to the current low level of interest rates.

Head of Retail for St.George Bank Neelam Tandon says there seems to be an ongoing tug of war for Australian households between deposits and real estate – with real estate coming out on top.

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“When households were asked how they would invest any potential new savings, 28.2% of respondents said they would direct these towards real estate compared to 27.0% of households who preferred bank deposits.”
“The results show that there is likely an increase in ‘everyday mum and dad investors’ who see opportunities in the current financial climate.”

“It also signals that Aussie households could be looking at investing, or directing to super rather than a mortgage, given households who are saving to buy or put a deposit on a house fell 2.1 percentage points to 13.8% over the quarter.”

“At the same time, saving to renovate or improve a home rose 1.4 percentage points to 38.5%, which could also signal increasing housing prices driving homeowners to renovate rather than relocate,” adds Neelam.

When looking at the big picture, Australia’s household financial conditions declined marginally in the September quarter, but still remain up 4.4% on a year earlier.

Chief Economist for St.George Bank, Hans Kunnen, says the improvement over the year can be explained by a pick-up in job growth and the decline in mortgage rates earlier in 2015.

“Those in the 25-64 age group saw the greatest improvement in financial conditions during the September quarter – likely to be positively affected by recent job creation and again lower mortgage rates.”

We also saw a strong rise in the financial condition of those at lower income levels during the September quarter – this may be a reflection of solid growth in part-time employment.”

Hans adds that there was more good news with relation to credit card debt, with a decline in the proportion of respondents reporting that they held card debt, both over the quarter and the year.

“This may indicate that cash is being used to pay for goods and services or that credit card debt has been paid off.”

Key findings

  • The Household conditions index declined marginally in the September quarter but is still up 4.4% on a year earlier.
    The improvement over the year can be explained by a pick-up in job growth and the decline in mortgage rates earlier in 2015.
  • In the September survey, more respondents reported having savings in investment properties.
    In the face of low interest rates, savings directed towards property lifted again during the September quarter.economics
    The proportion of respondents having this form of savings has risen to its highest level of 25.9 per cent since the survey first started in March 2001.
  • Over the year to September the major changes in preferences for any new savings were a decline for bank deposits and increases for real estate, paying down debt, shares and spending the hypothetical savings.
  • A marginally smaller proportion of respondents were running into debt in the September quarter but more drew on their savings.
    The percentage of respondents saying they were able to ‘save a lot’ rose a 0.9 percentage points to 9.1% of respondents.
  • There was an improvement in financial conditions among those in the 25-64 age range during the September quarter.
    This is an age range which is more likely to be positively affected by recent job creation and lower mortgage rates (for those who have a mortgage).
  • Financial conditions for those 65 and over improved a little but there was a sharp decline in financial conditions for those in the 18-24 age group.
  • Mortgage debt was the most common form of debt reported in the survey with 36.5% of respondents indicating they held a mortgage.
    This was up from 36.1% in the June quarter reading and broadly at the same level as a year earlier.
  • The proportion of respondents reporting that they held credit card debt was down over the quarter and the year.
    This may indicate that cash is being used to pay for goods and services or that credit card debt has been paid off.
    This finding corresponds with weakness in the ‘other personal’ credit data released monthly by the RBA.
  • Saving to buy or put a deposit on a house fell 2.1 percentage points during the September quarter.
    At the same time saving to renovate or improve a home rose 1.4 percentage points.


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About

Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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