Household Finance Confidence Higher Again

The latest data from the Digital Finance Analytics Household Finance Confidence Index shows a further improvement, with the November score now just above the 100 neutral position at 100.02. This is up from 98.2 in October, and the first time since 2014 we have been above the neutral setting.

fci-nov-2016-summaryThe full effect of recent rate changes and the availability of low-rate fixed mortgages, together with climbing home values in most states, combined,  have driven both home owners, and property investors confidence higher. In fact, for the first time in more than a year, property investors are more confident than owner occupiers. On the other hand, the one-third of households excluded from the property market drifted lower, thanks to higher costs of living and static or falling incomes.

fci-nov-2016-propertyLooking across the states, households in NSW are much more confident, with VIC slightly behind. Households in WA reported a fall in confidence, thanks to poorer employment prospects and falling home prices.

fci-nov-2016-statesjpgOn average households were a little less comfortable with the amount of debt they hold, thanks to expectations that interest rates have passed their low point, and will rise. 27.6% of households were less comfortable, up 3.9% from last month.

fci-nov-2016-debtWe also see a continued fall in real incomes, thanks to rising costs and flat or falling pay. 47.5% said their incomes had fallen, in real terms, in the past year, up 2.3% last month.

fci-nov-2016-income Households reported improved investment incomes from stocks and term deposits. However, appetite for investment property, especially down the east coast remains strong.

On average, younger households were less confident compared with those aged above 50 years.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

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