Stats NZ says property assets owned by Kiwis increased in value by more than $300 billion over a 10-year period

The net worth of New Zealand households was $1.5 trillion at March 2017, up from $886 billion at March 2007, Stats NZ said on Monday.

The rise in value of property assets was the main contributor to the overall increase in the net worth of households.

From March 2007, property assets owned by households rose $316 billion. Of this, 85% was due to price rises in property assets, nearly all occurring from March 2012. From 2007 to 2012, there was little net change in the valuation of household property assets, a period dominated by the effects of the global financial crisis.  

“Household financial assets and non-financial assets grew at similar rates from 2007 to 2017,” national accounts senior manager Susan Hollows said. “Non-financial assets continue to comprise about 54 percent of total household assets.”

The pension fund sector, which includes KiwiSaver (established in 2007), is where many households place money for their retirement. Pension funds invest money in deposits, debt securities, shares, and investment fund shares. Growth in these assets belonging to pension funds has been strong since March 2012, and at March 2017 were $51 billion (204 percent) higher than at March 2007. Of this rise, about 88 percent was from net contributions to funds, and the remainder from changes in the market price of investments and other changes.

Most lending by banks is in the form of loans to households, businesses, and others. The growth of bank loan lending slowed in 2017, to 6 % compared with 9% growth in 2016. 

Banks fund their lending by raising funds in the form of deposits, debt securities, and loans. From 2007, the greatest growth in funding was in the form of deposits, up 92% at March 2017. However, in 2017 deposit growth slowed. This partly reflects households making fewer additional deposits in banks, from $14 billion in 2016 to $11 billion in 2017. With lower deposit growth, banks borrowed more in the form of debt securities in 2017 than they did in 2016.

“These statistics reflect New Zealand’s economy up to March 2017 and show the longer-term trends and structural features of the economy’s assets and liabilities,” Hollows said.

Stats NZ is developing an equivalent quarterly series to improve timeliness. These quarterly accounts are scheduled to be released in 2020.

Household net worth statistics: Year ended June 2018, which will be released on 14 December, is sourced from household surveys rather than the national accounts. This release will provide more up-to-date information about household wealth, including demographic splits.  

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

59 Comments

Woo Hoo its Moet for Christmas.

Moet has become ubiquitous given they discount it every Christmas. Maybe move up the price scale.

Dom Perignon

I prefer Moet, price doesn't come into it.

We should use our new found wealth to buy some extra Moet or maybe a few cases of Laurent-Perrier to send over the ditch to Sydney so that they can toast our success this Christmas! Hopefully they'll send a few stubbies our way next Christmas!

Hope everyone here got their share of the $300billion.........

That’s quite a lot of moolah.

Merry Christmas!

TTP

up
10

That money has to be paid for by the next generation

If by "next generation" you mean a buyer then yeah, that's how it normally works when people own stuff, they get to sell it to a buyer...

So, adding $300m of debt to the next generation is a cause for celebration (as per TTP above)?

For the sellers hell yeah.

Great wealth generator if you're brave enough to sell your house and live homeless.

Popping the top off a bottle of bubbles at the top of the bubble. Nice, excellent way to celebrate.

up
14

" Of this, 85% was due to price rises in property assets, nearly all occurring from March 2012"
ie. 85% of this is meaninglessness...

up
10

This. If we’d invested our money if shares we might have seen a comparably large % increase and actually owned something that produces a real return. Instead we just bid up a domestic assets value and guess what? It produces exactly what it did before. In 2007 a house that provided shelter to 4 people still provides shelter to 4 people.

Sorry, this is nonsensical. Assets that are scarce appreciate -gold, fine art, classic cars and 800 sqm within 10km of a cbd. Actually producing something can always by out-sourced or disrupted. So, take your chances with overpaid CEO's and corporate fraud - Fletchers, Sky TV and CBL Insurance - I will take my chances with the land.

Or you know Apple, Microsoft and Amazon.

Aluminium was once very valuable, now it’s cheap enough to make cans out of. Scarcity is a relative thing but a diversified share portfolio is always valuable.

Tell that to someone who just sold and banked a monster capital gain.

How did they bank it?

Did they die or leave the country?

Or they in the small minority who have two properties?

Because if they aren’t in those three categories then their capital gain is meaningless.

They bought in March 2007 for $1m and sold in March 2018 for $1.85m. The $850k tax free gain (which they have realised i.e. "banked") plus potential defrayed rent (if owner occupier) or rental income (if landlord) over the last 10 years is not my idea of meaningless.

You didn’t answer my question. Where were they living before and where are they living now (relative to the house that was sold).

Living in the house in Auckland that they sold and now living in property they bought in Wyndham for $150k.

Lets do owner occupier who is still alive and stays in the same city.

John buys a house for $1M in 2007. 10 years later John sells his house for $1.85M. John now has $1.85M whereas before he had $1M. John needs somewhere to live so he buys a new house. John doesn’t want to live anywhere worse than his old house so he pays a minimum of $1.85M. Therefore John has <= $0 ignoring other assets. Therefore as a result of the change John is either no better off or worse off. If John wants to upgrade he is worse off since he prospective house has increased by more than his existing house.

Fake news. You drummed up a scenario as if they hadn't banked their gain e.g. didn't sell is the same as selling and buying at the same price/time. Time waster.

“ didn't sell is the same as selling and buying at the same price/time.”

Lol. This is my entire point and the flaw in treating the home you live in as a financial asset.

If you live in a house, you can only realise a gain by:

• selling and moving to a smaller house - not desirable for most people except during certain stages late in life.
• dying and selling.
• selling and moving to another country (and hoping their property increased by less)
• selling and renting (noting renting has its own costs which should be greater than owning).

Assuming you are continuing to live in the same style you always have there is no financial gain.

If you try to upgrade there is a financial loss.

It’s called maths and calling it fake news does not help your case.

Lots of people cashed up in Auckland and moved to cheaper locations which were just as desirable e.g. Tauranga, Dunedin, Taranaki and Hamilton (Hamilton is obviously a joke:). Lost of people also woul've sold the family home and downsized to a cheaper smaller property.

Your claim a capital gain when realised is meaningless is BS. You're only scenario is one where the capital gain is not realised because the seller hasn't cashed it in due to buying another property at exactly the same price.

What if they are renting now.

Maths in 1 fairy tale scenario you have made up = Fake news.

Yes if you are prepared to move from Auckland to Dunedin you get a gain. But how many percent of people are in that scenario versus the ones who want to stay out or upgrade. If it’s a 90/10 or a 80/20 ratio then arguing people on the whole are better off is silly.

You need to go back to school and do Math again.

up
10

I did. And Rastus is right.

It's meaningless unproductive wealth.
That's exactly why I got out of the only home I owned.
People have gone mad.

"Be fearful when others are greedy and greedy when others are fearful."

Will wait and see what happens in the next 6-12 months.

So you're saying you sold your house because it's quote: "meaningless unproductive wealth", what a load of bo!!ocks

Again, I did.
Owned it for 10 years.
Sold it.

It is unproductive - I was rent-vesting with aspirations to moving back into that house but the dream is only getting further away. I can not comprehend why anyone would ever want to own a portfolio of rental properties. I had amazing tenants but it was still the most painful exercise I've been involved in.

An sure it was a good capital gain, but not amazing considering what is available in other asset classes over that same horizon.

Productive? No. I maintained it well and ensured that I did everything to ensure it was warm (heatpump) and insulated (double-glazing etc).
No one got a job out of me owning that house. Except the lawnmower - is that what we want to be? A nation of landed people with lawnmowers and cleaners.

Meaningless, yes - The capital gain is totally speculative. It's completely devoid from fundamentals:
- Price-to-income? Crazy high 9-10x in Auckland, with investors leveraging at 5-6x
- Yield? Minuscule - <3% in most Auckland suburbs. So everyone is hanging out for capital gains when multiples are already massively stretched.
- What's the one thing that prices hang on? Credit availability. Everyone is extrapolating prices as if the credit cycle isn't a cycle but is just a linear progression. They don't understand the fundamental driver of prices.

I'm putting the money to work elsewhere. Happy to rent in the interim.
Good luck holding on to yours - you sound like as much of a religious adherent as the teenagers who were counting their bitcoin holdings last year and vowing never to sell...

Your reply to HeavyG implies you got a "monster capital gain". Such a weird comment, truly tiresome contribution. You could have paid people to do the lawn mowing etc.

I'm putting the money to work elsewhere. Money from capital gain? Why not donate it to charity?

It's tiresome because you guys never step back and take a sober look at the market.
You know one asset class and that's it.
So you have to keep your hands on the pump - kill the naysayers!

Firstly, the intent was for this to be my primary residence so I didn't go in with any investment expectations. I'm not a rabid socialist so it won't be going to charity - I'm a libertarian but that doesn't mean I have to humour the manic stupidity of property investor devotees. This is by far the stupidest asset class to "invest" in generally - if it was really smart money then why haven't corporates or institutional investors jumped in to residential property investment? They can pick a mugs game a mile away despite the gains had this cycle.

Secondly, if I did look at it through that investment lens - it wasn't "monster" when discounted over 10 years - an IRR of 6.1% for 10 years on a highly leveraged asset is by no means "monster". Just because it's a high absolute number doesn't mean anything. It's a risky position in a market whose fortunes are determined by the sentiment of highly unsophisticated fools with ready access to leverage. That's not just a recipe for disaster, it's a bonfire.

Again, I'll sit on my hands for 6-12 months before (maybe) buying back in.
And again, only one house, as a primary residence.

I wouldn't stay out of the market too long if I were you.

ZS ....spoken like a true property spruiker/investor/ RE agent with all his assets in the Auckland residential property market.... I wish I had just as much faith as you have ZS, that everything is going to be "just peachy" in the coming 2019....people are going to look back at this market from 2012 to now and realize what a waste of resources, when everyone is just running around paying over priced rents or larger mortgage repayments than they needed to ...while that whole time, all that extra revenue could of gone to R&D, new industries, innovation, expanding markets etc etc etc .....not working taxpayers subsidising rents through the accommodation supplement, so property investors can cover their mortgage repayments.... the only real winner are the banks !!!

Another one of our smarter commentators has made an exit from the property market. Hmmh....

He's still part of the property market as he is now paying rent.

I'll happily pay some mug's <3% yield rather than re-levering in the current market...
- NZ multiples highly stretched whilst at the same time;
- US-China trade war;
- Australia's property market spiraling and threatening the real economy;
- Australia sitting on one of the world's highest household debt - household income ratios at 200% (NZ not far behind);
- China growth stalling;
- US on the verge of tipping into a bear market;
- US Treasury yield curve inverting between 3-5 year and close to inverting on 2-10 year;
- US corporate debt balloon, with most sitting on the precipice of junk and a wall of refinancing required in 2019
- Europe imploding economically through a combination of social unrest, uncontrollable migration, and (not least) Brexit.

But you sit comfy in the knowledge that Auckland house prices follow a reliable, formulaic script - double every 5 years then flat for 3 right?
Where is Ashley Church hiding these days?

I'll have a miniature violin and popcorn at the ready when you want to chat about how much the market correcting has "cost" you and how much equity have "lost".
It's likely you've never actually held that equity and given your adherence to the Gods of price-always-goes-up... never likely will.

cmat, so you will be putting your money in term deposits then?

Nope, OBR is a risk and yields are almost as bad as investment property.

Don't worry - I have a handy instrument with bullet-proof yield >3% :)

Oh you’re a busker?

Yeah, busking. Sure.

What instrument do you play?

I play your credibility.

And I don't just play it, I really thrash it.

Incredible!

I'm talking NZ inc. You are talking individual. Same housing stock as before..just more debt, justified by bubble valuations. Guess what...the bubble will burst (is), but the debt won't.

Forget the latest 'results'...look over the hill.

Sorry, I thought you were trying to make a productive point but it was just another pointless "market will crash" DGM mantra. Keep up the bad work.

..no harm in countering the rubbish, you, your spruikers, the banksters and msm are dishing out.

The sun is shinning and I no longer have the dim shadow of busloads of money launderers and undesirables cruising my street. Now for the readjustment where I can welcome some deserving young fhb back.

Keep talking it up, great for a daily chuckle.

HeavyG, commenters complaining about the capital gain do so only because they missed out.

That is funny because I bought a house in 2011 and I’m complaining. Do you know why I’m complaining? Because it’s a BS capital gain, that is why.

Thats funny Hardly because you can always sell it for half its currently worth to a deserving FHB and then you can feel good about not taking that capital gain. Yeah didn't think so.

Wealth effect or wealth illusion? The other therapeutic effect of lower-for-longer
interest rates is the wealth effect. By driving up the value of future cash flows with
lower rates of interest, all manner of assets – stock, bonds, and houses – increase in
value and, thereby, can stimulate our marginal propensity to consume. More simply
put, the imperative was to make rich people richer so as to encourage their
consumption. It is not so hard to imagine negative side effects.
There are the obvious distributional effects between those who have assets and
those who do not. Returning house prices in California to their 2005 levels may be
good for those who own them, but what of those who don’t?
There are also harder-to-observe distributional consequences that flow from the
impact of lower-for-longer interest rates on the value of our liabilities. This is most
easily observed in pension funds.
Consider two pension funds, one with a positive funding ratio and one with a
negative funding ratio. When we create a wealth effect on the asset side of their
balance sheets we also drive up the value of their liabilities. Lower long-term
interest rates increase the value of all future cash flows – both positive and negative.
Other things being equal, each pension fund will end up approximately where they
started, only more so.
The same is true for households but is much more ominous, given the inequality of
wealth with which we began the experiment. Consider two households: one with
savings and one without savings. Consider also not just their legally-defined
liabilities, like mortgages and auto-loans, but also their future consumption
expenditures, their liability to feed and clothe themselves in the future.
When the Fed engineered its experiment to promote the wealth effect, the family
with savings experienced an increase in the present value of their assets and also an
increase in the present value of their liabilities. Because our financial assets are
traded in markets and because we receive mutual fund and retirement account
statements, we promptly saw the change in the value of our assets. We are much
slower to appreciate the change in the present value of our liabilities, particularly
the value of our future consumption expenditures.
But just because we don’t trade our future consumption expenditures on the stock
exchange does not mean that the conventions of finance do not apply. The family
with savings likely ends up where they started, once we consider the necessity of
revaluing their liabilities. They may more readily perceive a wealth effect but,
ultimately, there is only a wealth illusion.
But what happened to the family without savings? There were no assets to go up in
the value, so there is no wealth effect – real or perceived. But the value of their
future consumption expenditures did go up in value. The present value of their
current and expected standard of living went up but without a corresponding and
offsetting increase in assets, because they don’t have any. There was no wealth
effect, not even a wealth illusion, just a cruel hoax.
https://www.grantspub.com/files/presentations/FISHERGRANTSREMARKS15MAR17...

I wonder how much of that went to offshore investors? Half?

Look, at the end of the day I think most ordinary new zillanders would consider the National party LINZ figure of 3% to be pretty accurate. There is no need to spend the hundreds of thousands needed to maintain a foreign buyers rigister. Besides nobody here is foreign anyway, we're all immigrants including those straight off the plane. Now anyway let's get to the important issues, the rugby and the new flag.

So, 300.000.000.000 / 4.5m kiwis is just 66k / each NZ'er. Clearly my family does not feel $266.000 reacher....

I think I got your family's share of that.

The problem with this article is that, yes, property assets have increased in value greatly, but the other part of this is that so has private debt. We have a private debt bubble. When the housing bubble pops, like it is in Australia right now, the private debt will still be there. We'll have to face it sooner or later.

Saw an interesting video a while back on how basically money was made out of debt creation. Essentially its how our monetary system works and so without debt the whole thing falls over. So the upshot is its Hi Ho Hi Ho off to work you go to pay off a chunk of money that didn't exist so you get to live in your house. There is no private debt bubble. The population is increasing and the house prices have doubled so of course we all owe way more in total. It never gets "Paid off" it just keeps getting bigger.

I'm not arguing about how that works, just that it's way out of whack in terms of debt to income, which is well known. When so many mortgages are being allowed at 6 times income and more, that's trouble when/if prices fall. But of course they never do *cough* Ireland, Spain, US, now Australia.

Let's put some perspective on these numbers. According to the Reserve Bank of New Zealand (whose series are very similar to those of Statistics NZ), in March 2007 household wealth was $886billion, rising to $1440 billion by September 2017. This is an increase of $554 billion. (Spreadsheet HC22)

The value of housing, owner-occupied plus rental, increased from $586 billion to $1051 billion over the same period: an increase of $465 billion or 80% of the total increase in the value of assets.

This means the value of non-housing assets owned by households increased by $89billion in ten years. This does not seem a particularly large number.