How Australian households will look in 2015

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Let's run through what the Reserve Bank of Australia (RBA) has found this month for households and the housing market.

Part 1: Households and finances

Retail sales growth is humming along both in terms of values and volumes, largely driven by Sydney retail.

Savings ratios have been elevated since the financial crisis as households shored up their finances, but the ratio now appears to be gradually declining again as low interest rates encourage investment in growth assets.

Consumer sentiment has been knocked around a little by budgets and other adverse news, but remain fairly close to where it has been averaging for the last 34 years.

Household wealth in Australia is now at record highs in absolute terms. In terms of net worth as a percentage of annual household disposable income, asset values are growing nicely, and liabilities are holding steady.

Interest paid as a percentage of household disposable income has declined in tandem with mortgage rates . Indeed, mortgage serviceability is at its best level in more than a decade.

Part 2: The housing market

Stimulated by rising dwelling prices, building approvals brushed record highs, but have now seemingly passed their peak. We will see an oversupply of dwellings in a few regions – one would be wise to steer clear of these, of course.

Housing loan approvals rise to record highs, largely driven by investors in this cycle, the direct result of low borrowing rates.

And finally, to housing prices. As we expected some years ago, due to an inherent undersupply of dwelling stock and infrastructure, Sydney prices are soaring towards $1 million.

With both the M2 and the M7 closed again earlier this week, and barely a day passing without news of diabolical traffic woes, expect there to be a continuing surge of demand for properties located close to key transport hubs such as rail or light rail links.

Elsewhere, Melbourne has been looking peaky for months but has held up reasonably well to date.

Perth's market is trending slightly up but only moderately, while Canberra is now all set for a downturn. The Adelaide market – and particularly its economy – remains unconvicing,

Counter-cyclical investors should be scoping out opportunities in Brisbane, where housing finance is gathering momentum – as reconfirmed this week by AFG's December Mortgage Index data.