Strong housing market makes us wealthy
The net worth of New Zealand households increased significantly in the December 2003 quarter, according to the latest Westpac Household Savings Indicators.
Wednesday, February 25th 2004, 11:28PM
Over the quarter ended December 2003, total net worth rose a record $12.6 billion (equivalent to 5.2%) to $257 billion. Net worth is $35.2 billion higher than the same quarter a year earlier. Financial net worth – which excludes housing assets and liabilities – increased by $1.97 billion in the quarter, the third consecutive quarterly increase.
The December quarter saw assets of New Zealand households perform very well thanks to a housing market that has stayed robust despite increasing concerns over the sustainability of demand. Of the $16.4 billion (4.9% q/q) increase in total assets in the quarter, about $14.2 billion was attributable to an increase in the value of the housing stock. The latter is now up $40.2 billion or 20.7% from a year ago.
“Housing continues to dominate households’ portfolio, making up two thirds of total assets. The strength of the housing market over the past year has added $40 billion to the value of households’ assets,” NZIER senior research economist Doug Steel says.
The value of financial assets rose $2.2 billion (1.9%) in the quarter and $7 billion (6.4%) from a year ago. In particular, the value of funds under management posted a rise of $0.7 billion (1.8%) in the quarter, the third consecutive quarterly increase.
“Renewed interest in equity markets has been sparked by signs of an increasingly widespread global economic recovery. Unsurprisingly, the appetite for equity-linked investment vehicles has been on the rise.” Morningstar head of research Ross Weaver said.
Unit trusts and group investment funds received net inflows of $404 million over the past year. The $78 million inflow over the December quarter, combined with improved asset prices, boosted these investment funds by a total of $160 million in the quarter to about $9.3 billion, a level not seen since the 2001 crash in global equity prices. There were also significant quarterly increases in the values of private share holdings ($521 million) and superannuation fund assets ($524 million).
The value of cash and term deposits increased by $0.9 billion (1.8%) in the December quarter. Compared to a year ago, deposits are up $2.8 billion (5.6%).
Household borrowing increased by $3.8 billion in the December quarter, a rise of 4.2%. Compared to last year, total household liabilities have grown by $12.1 billion or 14.6%. Virtually all new borrowings were associated with housing, in line with the current robust state of residential property and relatively low mortgage rates.
The increase in housing loans is also reflective of higher house sale prices.
“Net equity in housing has increased despite the strong growth in housing loans, as growth in the value of the housing stock has been even faster.” Westpac chief economist Brendan O’Donovan said.
According to the Westpac Index of Household Net Worth, net worth per household as well as net worth per capita has been on a rising trend for just over two years and are at their highest levels in more than 10 years.
“This growth in household net worth will help sustain economic growth at a time when exporters increasingly feel the pinch of a high exchange rate” O’Donovan said.
“However, with migration flows falling and interest rates rising, the boost to household wealth from the housing market will abate over the coming year.”
| « Strategic asset allocation – it’s still a low return world | Kingfish fund covers the small fry » |
Special Offers
Commenting is closed
|
|
Printable version |
|
Email to a friend |
