Wealth gap Widens: Australian Property Ownership Fuels Generational Divide
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New data reveals a growing disparity in wealth accumulation between generations in Australia, largely driven by property ownership and influenced by fluctuating interest rates. The Finder Wealth Building Report 2024 highlights a notable gap in multi-property ownership across income brackets and age groups.
Property as a Key Driver of Inequality
Australia, while generally exhibiting a relatively balanced wealth distribution compared to other nations – with the top 10% controlling 44% of the national wealth, according to Finder’s report – is increasingly seeing wealth inequality exacerbated by its strong reliance on property as a primary wealth-building asset.
The Finder Wealth Building Report 2024 indicates that 16% of households earning over $100,000 annually own two or more properties. This contrasts sharply with only 6% of households with incomes between $50,000 and $100,000 holding multiple properties.
Generational Disparities in Homeownership
This trend is especially pronounced across generations. The report shows that 10% of Baby Boomers and 13% of Gen X respondents own two or more properties, while only 5% of Gen Z individuals surveyed can claim the same.
These findings align with similar observations made in analyses conducted by UBS, examining wealth distribution in the United States and the United kingdom. UBS’s research, based on data from the United Nations, World Bank, International Monetary Fund, and various central banks, reinforces the global trend of property contributing to generational wealth gaps.
Interest Rate impact and Future Outlook
The current interest rate environment, as of August 2024, with the official cash rate set by the reserve Bank of Australia at 4.35%, further complicates the situation. Higher interest rates make property ownership more challenging for younger generations, potentially widening the existing wealth gap. The RBA has indicated a data-dependent approach to future rate adjustments, citing inflation and employment figures as key indicators.
Finder’s report suggests that choice wealth-building strategies, such as diversified investment portfolios including shares and managed funds, are becoming increasingly significant, particularly for younger generations facing barriers to homeownership.However, access to financial literacy resources and investment advice remains unevenly distributed.
Source: Finder Wealth building Report 2024 (Download Report), UBS Global Wealth Report, Reserve Bank of Australia.