PROPERTY PROVING TO BE BEST INVESTMENT, ACCORDING TO REPORT

Published : 11 November 2015

If you're thinking of investing your hard-earned cash in property, you're not alone! In fact, according to the latest St George-Melbourne Institute Household conditions index - released on October 30 - you're definitely on the right track.

The quarterly report shows the biggest increase for Aussie homeowners investing in property in over a decade and reveals how household savings directed towards property lifted to 25.9 per cent during the September quarter - the highest level since the index began in March 2001.

Interestingly, while deposits are still popular, their popularity has declined over the year to September 2015, most likely due to the current low level of interest rates.

Real estate coming out on top

Head of Retail for St George Bank, Neelam Tandon, said there appeared to be an ongoing tug-of-war for Australian households between deposits and real estate – with real estate coming out on top.

“When households were asked how they would invest any potential new savings, 28.2 per cent of respondents said they would direct these towards real estate compared to 27.0 per cent of households who preferred bank deposits,” she said.

“The results show that there is likely an increase in ‘everyday mum and dad investors’, who see opportunities in the current financial climate. It also signals that Aussie households could be looking at investing, or directing to super rather than a mortgage, given households who are saving to buy or put a deposit on a house fell 2.1 percentage points to 13.8 per cent over the quarter.”

Ms Tandon pointed out that saving to renovate or improve an existing home had also risen, by 1.4 percentage points to 38.5 per cent, which could also signal increasing housing prices driving homeowners to renovate rather than relocate.

Decline in mortgage rates

The St George-Melbourne Institute Household conditions index also revealed that Australia’s household financial conditions declined marginally in the September quarter, but still remain up 4.4 per cent on a year earlier.

Chief Economist for St George Bank, Hans Kunnen, said the improvement over the year could be explained by a pick-up in job growth and the decline in mortgage rates earlier in 2015.

“Those in the 25-64 age group saw the greatest improvement in financial conditions during the September quarter - likely to be positively affected by recent job creation and again lower mortgage rates.”

There was also a strong rise in the financial conditions of those at lower income levels during the September quarter, which may be a reflection of solid growth in part-time employment.

Credit card debt also declined during the quarter, and over the past year, indicating that cash is being used to pay for goods and services, or that credit card debt has been paid off.”

So, over the year to September, the major changes in preferences for any new savings were a decline for bank deposits and increases for real estate, paying down debt, shares and spending the hypothetical savings.

Mortgage debt was the most common form of debt reported in the survey, with 36.5 per cent  of respondents indicating they held a mortgage. This was up from 36.1 per cent in the June quarter reading and broadly at the same level as a year earlier.