The Reserve Bank of Australia (RBA) recently released its latest household finance ratios. The latest release of these figures indicates that the “ratio of household and housing debt to disposable income continued to climb over the December 2017 quarter, reaching a new record high,” according to CoreLogic’s most recent Property Pulse.
“The ratio of household debt to disposable income was recorded at 188.6% and the ratio of housing debt to disposable income was 138.9%. Over the past 12 months, the ratios have increased by 4.4% and 4.3% respectively,” CoreLogic said.
As the ratio of household and housing debt to disposable income grew, the ratio of household assets to disposable income has also gown. At the end of the December 2017 quarter, the ratio of household assets to disposable income was 961.5%, while the ratio of housing assets to disposable income was 525.3%.
These figures indicate that the value of household and housing assets are significantly greater than the value of household debt. The ratios for household debt to assets at the end of 2017 was 19.6%, while the ratio of housing debt to housing assets was 26.4%. These figures remain unchanged from the December 2016 ratios.
“It is important to recognize a few things about this data. Firstly, it is a macro view so there are households in a significantly weaker position (marginal buyers, recent buyers and owners in markets where values have fallen substantially)
as well as households in a much stronger position (households that have held their properties for many years),” CoreLogic said.
The data also takes into account households that don’t carry any housing debt. This is estimated to be around 40% of households.
With the value of household assets rising at a faster rate than debt in recent years, a shift is now starting to occur. As a slowdown in the value of household assets occurred in the last year, household debt continued to expand.