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Record improvements for Australian homeowners

Thursday, 22 January 2015

Biggest improvement in financial conditions for Aussie homeowners in two decades.

The quarterly St.George-Melbourne Institute Household Financial Conditions Report released today reveals December 2014 saw a record improvement in financial conditions for Australians that wholly own their own home. The solid rise in house prices has bolstered their financial position.

The report shows the financial conditions for those that own their home outright, jumped 15.4 per cent to 135.5 points from September to December. It is the biggest quarterly percentage rise on record since the report commenced 20 years ago. The St.George-Melbourne Institute Household Financial Conditions Index rose by 2.6 per cent from September to December to 128.80, representing the highest reading in one year.

Andy Fell, St.George Retail Banking General Manager said the findings suggest the upswing in the housing market has helped improve the quality of life and financial situation for Australians who have paid off their mortgages.

“The rising house prices and low interest rates we’ve seen over the past years have boosted household conditions for mortgage free homeowners and put them in a better financial position. This is an encouraging sign for Australians with home loans to take advantage of the current market and save more to down pay their mortgage so they can be a step closer to owning their dream home.

“The report is broken down by occupation group and the big winners were tradespersons and para-professionals who recorded the biggest jump with a 21.5 per cent rise in December. The financial conditions for this group is at the highest index reading in five years and is most likely due to the rising supply of housing and the demand for construction work,” Andy said.

In addition, the continued trend of adding to household savings is going strong with nearly one in two Australians (46.8%) adding to their piggy bank in December. This has increased by 3.7 percentage points compared to last quarter and is the highest proportion in one year.

Chief Economist at St.George, Besa Deda said consumer confidence remains fragile and is reflected in the proportion of households in 2014 that intend to decrease their debt levels.

“The number of respondents who said they would pay down debt with new savings rose by 3.9 percentage points to 17.6 per cent of all households in December. This is the highest proportion in almost two years and the biggest quarterly percentage rise in three years.

“The findings also show Australians are quite the savvy savers with just 2.2 per cent of households reporting no savings in December, not far from the historic low recorded in June last year,” she said.

Key findings:

  • The household financial conditions index rose by 2.6% from September to December to take the index to 128.80, the highest reading in one year. Compared to one year ago, however, the household financial conditions index is down 2.9%.
  • The proportion of households that have added to savings increased by 3.7 percentage points from September to December to 46.8%, the highest proportion in one year. The rise in December of 3.7 percentage points was the largest in ten quarters or 2½ years.
  • Household financial conditions rose by 7.4% from September to December for males to the highest index in one year of 136.1, but fell for females. Household financial conditions fell 2.0% for females in December, but remains 0.5% higher than a year ago.
  • All age groups recorded an improvement in household financial conditions. The age group with the biggest improvement was the 18-24-age group where a rise of 18.8% was recorded, the largest percentage increase in one year.
  • Household financial conditions for those that wholly own their own home jumped 15.4% from September to December to 135.5. It is the biggest quarterly percentage rise on record and has likely been supported by the growth in house prices.
  • Para-professionals and tradespersons recorded the biggest percentage rise in December across the occupation groups. Household financial conditions for this occupation group rose by 21.5% to 156.6, the biggest gain in five quarters and the highest index reading in five years.
  • The proportion of households holding shares lifted 3.0 percentage points to a one-year high of 37.7%, while the proportion saving through their super lifted 0.7 percentage points to 78.1%.
  • A large proportion of households continue to report some form of savings. Those reporting “no savings” edged up 0.2 percentage points to just 2.2% of all households in December, not far from the historic low recorded in June 2014.
  • The need to “deleverage” or pay down debt seems to have stepped up again in December among households, after retreating in September. The proportion of respondents who said they would pay down debt with new savings rose by 3.9 percentage points to 17.6% in December. This is the highest proportion in almost two years and the biggest quarterly percentage rise in three years.
  • The proportion of households which don’t have debt rose 6.9 percentage points to 46.5%, the highest proportion since September 2008.
  • The majority of households with debt continue to have very manageable debt levels. Most respondents (64.6%) reported debt service levels of 10% or lower of their after-tax income.

-Ends-

About the St.George-Melbourne Institute Household Financial Conditions Report

The St.George-Melbourne Institute Household Financial Conditions Report is a national survey of 1,200 respondents to arrive at a summary of key savings behaviours of households each quarter. The above information was gathered in December 2014, further quarterly results will be released in April in 2015.

For interviews with Andy Fell or Besa Deda and further information on the report please contact:

 

Media contact:

Dianne Edwards
St.George Bank
P: 02 9236 3521
M: 0421 623 014
E: edwardsdi@stgeorge.com.au