So, the household debt burden has shot up. But more perspective is needed. Economists frequently wring their hands about debt without necessarily considering the other side of the balance sheet. And comparing household debt to equity shows household gearing is actually at the lowest level since records began.
Our calculation of a housing gearing ratio has it at a little above 20%. Now, clearly this reflects the fact the housing boom has (over?) inflated the value of housing assets to unprecedented levels. And there’s nothing to say this value will be indefinitely sustained. Indeed, the higher house prices go the bigger the risk we see some sort of correction down the line.
But the fact that households are only lightly geared, in aggregate, is still important context.
Source: ASB Bank
#assuredproperty #housing #rentals #propertyinvestment