Marc Jocum
Australian household wealth hit a record high in the December quarter of 2025 and outpaced gains in share markets. While we are richer than ever, according to the Australian Bureau of Statistics’ balance sheet, Australians may need to recess their high allocations to property over the coming year given rising interest rate and a potential slowdown in real estate prices.
Household wealth hit a record $18.85 trillion in the December 2025 quarter, according to data from the Australian Bureau of Statistics. That was boosted by rising property values, with households holding a whopping $12.53 trillion in real estate assets, up 3 per cent from the September 2025 quarter.
The total value of dwellings Australians held surpassed $12 trillion for the first time as property prices jumped, with the national mean dwelling price increased 2.7 per cent to $1.07 million over the December quarter, according to the ABS.
While the dollar level of share ownership rose over 2025, the proportion of household wealth invested in shares has dropped in the last two decades. Direct shareholdings accounted for just 9 per cent of household wealth, a proportion which has diminished recently as property values have surged.
That has dropped from around 13 per cent in December 2005. In contrast, this ABS data clearly shows that a big chunk of the nation’s household wealth, or around 66 per cent, is invested in property, and much more than the record $1.70 trillion held in shares, $1.98 trillion in cash deposits and $4.55 trillion held in superannuation, with the latter expected to move from being the fourth-largest to the second-largest retirement savings in the world by the early 2030s
With interest rates likely to continue rising in 2026, following a 50-basis point rise since October 2025, Australian households may want to consider lowering their huge exposures to property.
Rising interest rates can have larger effects on housing prices in locations where the supply of housing is less flexible.
Higher rates could dent demand for property and potentially hurt prices, particularly if we see a slowdown in economic growth resulting from the Iranian conflict and a rise in inflation and unemployment.
Previous modelling from the Reserve Bank of Australia had suggested that a two-percentage point hike in rates, if permanent, is likely to result in a 30 per cent fall in house prices. While a temporary increase would have a lesser impact, clearly interest rate rises dent the property market, especially given individuals’ borrowing capacity reduces.
Many banks have also downgraded their outlook for Australian property prices, with ANZ decreasing their 2026 outlook by 2 per cent.
The RBA research also found that rising interest rates can have larger effects on housing prices in locations where the supply of housing is less flexible, mortgage debt is higher, there are more investors and incomes are higher. That could be Sydney or Melbourne or other capital cities where housing costs are high.
Adding to those headwinds, property investors also face growing policy risk, with the federal government actively considering reducing the capital gains tax discount for investment properties while negative gearing concessions may also be capped, both of which could further dampen investor appetite for real estate.
The time could be ripe for Australian households to think about raising their exposures to shares. Equities are more accessible than property, offer comparable, if not better, returns over the long term and typically are not as sensitive to interest rate rise rises.
In addition to potentially creating greater levels of wealth, there are other factors which favour shares over property as more accessible investments. Shares do not attract high levels of stamp duty, and you don’t need a big deposit to enter the share market.
Unlike property, shares can be bought or sold in seconds, with low brokerage costs and transparent management fees – a stark contrast to property’s web of hidden costs including agent commissions, conveyancing fees, land tax, council rates and ongoing maintenance expenses.
Marc Jocum is a senior product and investment strategist at Global X ETFs Australia.
- Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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