Aussies Packing on the Wealth

One of the most exciting pieces of news recently was that Australians have increased their wealth dramatically.

Indeed, our wealth went up by the biggest amount of anyone in the world.

Naturally there are some caveats to this achievement – this wealth increase won’t apply to everyone – but just the same it is an amazing overall achievement.

Property One of Our Investment Secrets

So, what was the secret to the Australian wealth increase?

To sum it up in one word it would be property, with our runaway real estate market pushing up the wealth of those in the population that own their own house, and/or own investment properties.

Superannuation also had a very good year, which bumped up our wealth as well.

Adding together net wealth from real estate and other financial assets, each Australian was worth an average €383,720 ($686,410) in 2024, making us the world’s third-wealthiest population.

The Allianz Global Wealth 2025 report showed the bulk of Australia’s per capita wealth comes from real estate, which is worth an average of €273,440 – second only to Switzerland’s €330,800.

The European country also knocked America off as the world’s wealthiest overall.

Fastest Rise of Any Country

By rising seven places in just one year, Australia was a clear global winner, while Sweden and Japan – which fell 6 and 8 places respectively – were the big losers.

Real estate has been a notable strong driver of per capita wealth in Australia and New Zealand for all of the 16 years Allianz has been producing the report, with average compound annual growth sitting at 5.4% between 2005 and 2025.

When you take inflation into account, that drops to a less impressive but still very useful average of 2.7% growth in real terms every year.

Australian real estate is almost unique in such a strong, long-term performance.

The next highest growth in nominal terms was in North America, which rose 3.6% and was a little above the global average of 3.2%.

Japan was a serious property under-performer, with just 0.5% average nominal growth, producing an average negative real return of 0.1%.

Japan Sending Us a Warning?

Can I suggest that Japanese number is also a bit of a warning to Australia and our dependence on real estate to grow net wealth?

Much of the poor performance of Japanese property is arguably due to a valuation hangover from the days when its property market boomed dramatically before entering a multi-decade slump as values painfully and gradually dropped back to more realistic and attainable levels.

While it is difficult to see a similar situation emerging here in Australia, there are dangers of concentrating too much wealth in one sector and it would be unwise to think that Australian property can keep shooting the lights out in perpetuity.

Social Problems and High Property Prices

There are also social problems caused by booming property prices–including falling levels of home ownership and wealth inequality across generations and society, to name just a couple.

Fortunately, Australians have a second arrow in their quiver in the form of our $4.2 billion superannuation system, which is also a major store of wealth.

More than 48% of Australians’ gross financial assets are invested in insurance and superannuation products, well above the global average of just under 26%.

That total is currently mandated to grow by 12% a year in the accrual stage, although it is worth mentioning that as the super system continues to mature more accounts will switch to withdrawal mode.

Even then, though, many super accounts continue to grow in nominal terms even in retirement as investment performance eclipses withdrawals in some years.

The investment performance and sophistication of those super accounts has also been improving, which has added to both the diversification of the super accounts and their performance.

In the longer term, it would be good if that increase in international diversification and sophistication was mirrored in the property investments of Australians, although with the concentration on owner occupied housing that might be something of a pipe dream.

As a local property owner might put it, “if you’re on a good thing, stick to it,” which may be true for now, although a Japanese style long-term downturn might one day test that resolve.