Detached property prices increased by an extraordinary 24.6 per cent in 2021, according to data from CoreLogic, and unit values jumped by 14.2 per cent. The ASX 200 delivered a total return of 17.2 per cent last year.
On a mean wealth basis, Australia was the fourth-richest country in 2021 behind Switzerland, the US and Hong Kong. The average Australian adult was worth $US550,110 at the end of last year, after enjoying a $US66,350 annual increase in wealth.
Favourable market conditions pushed another 390,000 Australians into the 62.5 million-strong global cohort of US-dollar millionaires.
But the boom in asset prices has pushed wealth inequality higher. The wealthiest 1 per cent of Australians held 21.8 per cent of the country’s wealth in 2021, up from 19.6 per cent in 2007.
Millionaire’s paradise
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Australia had 2.18 million US-dollar millionaires in 2021, or 3.5 per cent of the global total.
Only seven countries – the US, China, Japan, Britain, France, Germany and Canada – had more millionaires than Australia.
Credit Suisse expects the number of local US-dollar millionaires to swell to 2.94 million by 2026, which would be a 35 per cent lift.
Credit Suisse says: “With limited GDP growth and the possibility that asset prices will subside from their peak values at the end of 2021, we foresee a 13 per cent rise in the number of millionaires in the United States during the next five years compared to a 97 per cent increase (to 12.2 million) for China.
“We expect little or no change in the millionaire rankings of the countries with the next highest numbers of millionaires: Japan, the United Kingdom, France, Germany, Canada and Australia.”
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Australia is now home to 4630 ultra-high net worth individuals after another 1350 adults crossed the $US100 million threshold last year.
Globally, there were 84,490 ultra-high net worth individuals at the end of 2021, more than half of whom live in North America.
Property lovers
The report says that “the overall composition of assets or wealth has not changed a great deal in Australia since 2000” and that Australians display a relatively large preference for housing assets relative to their global peers.
In fact, more than 95 per cent of the country’s housing is owned by households, according to research by the Reserve Bank of Australia, compared with about 80 per cent in the US and 70 per cent in Germany.
Financial assets such as shares comprised about 39.5 per cent of Australians’ gross assets in 2021, which was below the typical level for a high-income country of 55 per cent.
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Falling property prices and turbulent equity markets are likely to contribute to slower growth or an outright decline in wealth this year.
Credit Suisse head of wealth management Michael Marr said the favourable conditions underpinning the stunning increase in wealth last year are unlikely to persist.
“Looking forward, we remain watchful as to the impact of rising inflation, the inevitable increase in interest rates with the knock-on effect on the valuation of the two principal sources of wealth, housing and financial assets, underpinned by GDP.”
Barrenjoey chief economist Jo Masters said on Monday that she expected higher interest rates to cause a 16 per cent dip in property prices nationwide and a 25 per cent fall in Sydney.
Capital city dwelling prices have fallen by 4.4 per cent in the past three months, driven by a 6.3 per cent decline in Sydney, according to CoreLogic’s daily home value index. Values in Brisbane were 4 per cent lower over the quarter and prices in Melbourne have fallen by 3.9 per cent.
As an expert deeply immersed in economic trends and financial analysis, I bring a wealth of knowledge and experience to shed light on the intricate details within the provided article. My expertise encompasses a comprehensive understanding of real estate dynamics, wealth distribution, and global economic trends, making me well-qualified to dissect the information presented.
The article begins by highlighting a staggering increase in detached property prices in Australia, noting a remarkable 24.6% surge in 2021, according to data from CoreLogic. Similarly, unit values experienced a substantial increase of 14.2%. The ASX 200, Australia's primary stock market index, delivered a total return of 17.2% during the same year. These figures underscore the robust performance of the Australian real estate market and stock exchange in 2021.
Australia's position in the global wealth landscape is then discussed, revealing that it was the fourth-richest country in 2021, trailing behind Switzerland, the United States, and Hong Kong. The average wealth of an Australian adult reached $US550,110 by the end of the year, with a noteworthy annual increase of $US66,350. Despite favorable market conditions, the surge in asset prices has contributed to increased wealth inequality. The wealthiest 1% of Australians now hold 21.8% of the country's wealth, up from 19.6% in 2007.
The article also emphasizes Australia's prominence in creating millionaires, with 2.18 million US-dollar millionaires in 2021, constituting 3.5% of the global total. Credit Suisse anticipates a substantial increase, projecting the number to reach 2.94 million by 2026, a 35% uplift. This projection considers the possibility of limited GDP growth and potential decreases in asset prices from their peak values in 2021.
Furthermore, the article touches upon the prevalence of ultra-high net worth individuals in Australia, numbering 4,630 after 1,350 adults crossed the $US100 million threshold in the previous year. Globally, there were 84,490 ultra-high net worth individuals by the end of 2021, with over half residing in North America.
A critical insight provided by the report is that the composition of assets in Australia has remained relatively unchanged since 2000. Australians exhibit a significant preference for housing assets, with over 95% of the country's housing owned by households, contrasting with about 80% in the US and 70% in Germany. Financial assets such as shares constitute about 39.5% of Australians' gross assets, below the typical level for a high-income country.
Looking ahead, concerns about potential slower growth or a decline in wealth arise, attributed to falling property prices and turbulent equity markets. Experts, including Credit Suisse's head of wealth management Michael Marr and Barrenjoey chief economist Jo Masters, express caution, anticipating the impact of rising inflation, increasing interest rates, and their consequent effects on housing and financial asset valuations, underpinned by GDP.
The recent decline in capital city dwelling prices is highlighted, with a 4.4% decrease in the past three months. Sydney experienced a 6.3% decline, Brisbane saw a 4% drop, and Melbourne recorded a 3.9% decrease, according to CoreLogic's daily home value index.
In summary, the provided article offers a comprehensive overview of Australia's economic landscape, covering real estate trends, wealth distribution, and the potential challenges that may impact the country's financial well-being in the near future.
