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Insights from the 2024 UBS Global Wealth Report
Are you feeling wealthier these days? Or perhaps you're puzzled about how wealth is growing amidst a cost-of-living crisis.
It might seem counterintuitive, but according to the Australian Financial Review (AFR), the average wealth of Australian adults increased by nearly 10% in 2023, outpacing the growth rate of 56 other countries. These findings come from the 2024 UBS Global Wealth Report.
Building Wealth through ASX Shares
Investing in ASX shares is a strategic way to build wealth, thanks to the generous dividends many Australian companies pay. ASX dividend shares can provide a reliable income stream and offer tax advantages when investing in fully franked shares. Popular dividend stocks include BHP Group Ltd (ASX: BHP), Fortescue Metals Group Ltd (ASX: FMG), Westpac Banking Corp (ASX: WBC), and National Australia Bank Ltd (ASX: NAB).
Wealth Growth in Australia
On a median basis, the wealth of Australians grew by about 5% to US$261,805 per person, equivalent to approximately AU$386,758. This makes Australians the second-wealthiest people globally, trailing only Luxembourg, which has a median wealth per person of US$372,258 or AU$549,927. Belgium follows in third place with a median wealth per person of US$256,185 or AU$378,456.
Currently, 1.9 million Australians are millionaires in US dollar terms, giving the country the third-highest number of millionaires per capita, with 10% of the adult population falling into this category. UBS also predicts a 21% growth in this cohort over the next four years.
How Australians Are Building Wealth
A significant portion of Australians' wealth is tied up in property and superannuation. UBS reports that more than half of Australia's wealth is in non-financial assets like real estate. In contrast, in the broader Asia-Pacific region, 60% of wealth is in financial assets like shares, bonds, and cash, while in North America, 70% of personal wealth is in such assets.
The Illiquidity Challenge
The illiquid nature of much of Australians' wealth poses a challenge during a cost-of-living crisis. While property values have been rising for 17 consecutive months, with national median home values increasing by 0.7% in June and homeowners gaining a median $59,000 in capital gains on paper in FY24, accessing this wealth can be difficult without selling the property or increasing home loans. Superannuation balances have also grown, with a 9% increase in median growth superannuation funds over FY24, and the average superannuation balance for Australians aged 65 to 69 years is $404,553, with a median of $198,715.
Wealth Transfer and Future Prospects
UBS values the impending global intergenerational wealth transfer from baby boomers to Gen Xers at US$83 trillion or AU$122.6 trillion. This wealth is already being distributed in Australia through the "Bank of Mum and Dad."
While asset-rich Australians may face challenges during a cost-of-living crisis, strategic investments and generational wealth transfers offer pathways to sustained financial growth.
