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BOOMING KIWIS ARE RICHER

THE average New Zealand household is worth about $235,000, up almost 9 per cent in the past year, but as people feel richer they are also borrowing heavily and spending more than they earn.

In the past two years, average household wealth has risen about $60,000 - most of it concentrated in the hands of homeowners, according to Spicers' quarterly household savings report.

The report shows the total pool of net wealth including assets such as the family home, shares and cash, less debts, reached more than $358 billion in 2004, up about $8.4 billion in the December quarter alone.

The value of housing was the fastest-growing asset, up more than 14 per cent in the past year to $354 billion.

As a result families have been taking on more debt. Debts rose even faster than assets, up close to 15 per cent in the year to about $120 billion.

"In fact, households' appetite for debt remains insatiable," Spicers says.

"The newly found wealth is being used not only to fund new housing, but also consumer spending," the report says.

Spicers said the pace of growth in debts in the December quarter was "of some concern" because the pace of growth in household assets had been slowing.

Interest payments had reached a 15-year peak equal to 10.4 per cent of average disposable income - higher than in Australia and Britain, but not as high as the United States. But households did not face the same degree of interest rate risk as in the past because most people now had fixed-term mortgages and interest rates had fallen significantly in the past 15 years.

If house prices kept rising on average about 2.5 per cent each quarter, the net worth of the average household would rise about $4000 each quarter, Spicers said.

However, with rising interest rates, falling migration and the risk that housing values may not rise as fast in future, Spicers says: "Consumers need to be more careful about adding to their debt levels."

The report also shows a "gloomy picture" for the annual flow of savings, as opposed to the stock of savings or wealth.

"Households consistently spend significantly more than they earn and this trend has been deteriorating for at least 15 years," Spicers says.

The current points passmark where skilled people are invited to apply to emigrate to New Zealand currently remains at a low 100.
The passmark is assessed every two weeks according to the quality of people applying to migrate.