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Rising house prices drive record wealth

Rising housing prices helped drive total household wealth to its highest level on record at $14.7 trillion in 2021.

Australian Bureau of Statistics figures show wealth increased by 4.5 per cent or $628 billion in the December quarter, while wealth per capita now stands at a record high of $566,541.

ABS head of finance and wealth Katherine Keenan said residential property prices rose 4.7 per cent during the quarter, reflecting record low interest rates, the labour market recovery and strong demand for housing.

However, house price growth is now slowing, reflecting the reduced influence of low mortgage rates.

A new house price series from online real estate advertising company REA Group shows prices increased 0.34 per cent in March, the slowest pace since May 2020.

The PropTrack home price index shows annual price growth of 18.01 per cent, resulting in a median home value of $684,000.

It notes fixed mortgage rates have already increased over recent months, and larger rises are expected as the Reserve Bank of Australia increases the cash rate, as widely expected later in the year.

“The outlook for price growth remains subdued, with the speed of official interest rate hikes the big unknown for the market in 2022,” it says.

Financial markets are predicting increases in the official cash rate from a record low 0.1 per cent as early as June, and are pricing in the risk of a rate of 1.75 per cent by the end of the year.

The long-established CoreLogic home value index for March is due on Friday, which economists also expect will show a 0.3 per cent increase for the month, matching the growth of the previous month.

The ABS will also release lending figures for February, which economists expect will show a 1.5 per cent increase for approved housing loans in the month after a 2.6 per cent rise in the previous month.

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