Home > Our Publications > New Zealand Outlook > 2005 > May

Kiwis now worth more

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 that 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.

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.

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."