Nick Nicolaides
Australian household wealth has hit an all-time high, rising for the fifth straight quarter, with property, cash and share assets all striking record-high levels in December 2023, with direct ownership of shares surging as global share markets rallied after volatile trading in 2022 and early 2023, drawing many new investors into direct equity ownership, many using ETFs, according to Pearler co-founder and CEO Nick Nicolaides.
Released today, ABS Household Wealth Data [1]show:
- household net wealth sat at a record $15.66 trillion in the December 2023 quarter
- wealth was boosted by a record level of property assets of $10.66 trillion
- households direct equity holdings hit a record $1.40 trillion
- households held a record $1.70 trillion in cash and deposits
- households held a record $3.74 trillion in superannuation, all record-high levels.
The ABS data showed that ownership of shares surged over the December quarter, with households’ direct ownership of equities rising 3.8 per cent or by $51.8 billion to $1.40 trillion. House prices continued to grow significantly, as did domestic and overseas share markets, despite higher rates.
Pearler co-founder and CEO Nick Nicolaides, commented on the data: “It is encouraging to see that Australians have been investing in equities despite rising interest rates and cost of living pressures. Listed securities such as exchange traded funds (ETFs) are far more liquid and affordable than residential property and many investors, especially younger generations, are using them as the primary tool to build a home deposit.
“Equities offer comparable, if not superior, returns compared to residential property over the long run. With young people increasingly being priced out of the property market, investing directly in equities, and particularly exchange traded funds (ETFs), is a more viable way to build wealth.
“That’s what we are seeing younger investors buying more heavily into equities compared to prior generations. The average age of Pearler users is 35 years, and they are largely buying ETFs to hold and build wealth. Pearler has seen more than 100% growth in equities holdings in the past 12 months; over 80% of investors’ money is being directed into ETFs and increasingly, those investing in offshore shares, which have risen in value more quickly than Australian shares.
“At the same time, we are seeing rates of home ownership among younger Australians fall significantly. The home ownership rate[2] of 25- to 29-year-olds was just 36% in 2021 and for 30-to-34-year-olds it was 50%, down from 64% in 1971. That compares to around 80% for people aged over 60. In addition, while wealth gains in residential property are huge, they have largely been made on paper only. Most people can’t easily sell their main residence to support their needs.
“For investors looking to diversify their household wealth, ETFs are the ideal investment to boost exposures to the more liquid share market. ETFs are cost-effective and can be easily bought online for little or no cost, unlike the prohibitive costs of buying residential property, which often involves a prohibitive level of stamp duty slug, a huge deposit and other high transaction costs,” Mr Nicolaides said.
“Platforms like Pearler offer a range of structures, with diversified investing from $5 into ETFs. Importantly, ETFs spread financial risk across a diversified portfolio of assets. Some ETFs can hold 50, 100 or even more companies or listed securities. ETFs offer access to local and offshore share markets and are diversified across different sectors that aren’t easily accessible in Australia, such as technology or healthcare.”
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