While 2012 was difficult year for most of us and particularly for those interested in property investment, it finished off with some good news.
The Australian Financial Review reported that average household wealth rose to a record $868,000 in 2012, driven by solid house prices and a sharemarket recovery, according to forecaster Outlook Economics.
It estimates the wealth of the average Australian family, including their home, superannuation and other financial assets, climbed by 6.6 per cent in 2012, the best annual increase since 2009, when the stimulus after the global financial crisis pushed up house prices.
Outlook Economics director Peter Downes said one of the interesting aspects of the rise in wealth was that it was driven not so much by rising asset prices as by people saving more.
“House prices have bottomed, the stock market is picking up and you have this big increment from saving,” he said.
Household wealth fell 4 per cent in 2011 as high interest rates and the end of the stimulus reduced house prices.
In 2012 across Australia, house prices in capital cities and regional areas edged up 1.4 per cent, Mr Downes estimates. The stock market also rose strongly.
He said that with low interest rates his model projected wealth would continue to rise. Eventually, the boost in wealth should translate into more spending as people felt more confident.
Household debt fell
Interestingly the Reserve Bank of Australia 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 and confidence rose as the year went on, but we’re still jittery as evidenced by a fall in confidence over the last month, despite a drop in interest rates in early December.
Overall I see 2013 as being an average year. By that I mean it will be better than 2012, but not as good as 2014 will be.
Source: Australian Financial Review
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