Spicers HSI - March 2007

• Download Spicers Household Savings Indicators - March 2007

Media Release

Spicers Household Savings Indicators

EMBARGOED UNTIL 6am Wednesday 14 March 2007

Financial net worth records its biggest annual rise in almost 13 years.

Financial net worth increased 3.5% during the December quarter and 11.1% during the year, the fastest annual increase since the March quarter 1994.

Financial assets were boosted during the year by a $9.6 billion inflow [13.9%] into bank deposits (the biggest annual increase on record) and a $2.7 billion [20.2%] increase in private share-holdings. Thanks to the share market’s stellar performance, more than half of this increase in private shareholdings occurred in the December quarter.

The introduction of two major incentives to encourage Kiwis to save - the changes to the tax on investments and the imminent introduction of KiwiSaver in July - will contribute to the future growth of financial assets.

For the first time in more than six years, the annual increase in housing assets (10.4%) was surpassed by gains in financial assets (10.6%). Nevertheless, housing appreciation remains the biggest contributor to the growth in household net worth, which rose 3.8% in the December quarter and 9.7% during the year. Average net worth per household increased $26,000 during the year to reach $352,200.

The annual rate of growth in total net worth continues to slow, and this is largely attributable to the slowing pace of housing appreciation. The 9.7% gain in net worth recorded in 2006 is significantly slower than 2005’s 15.3% rise and even slower than the dramatic 26.8% rise recorded in 2003.

A regional comparison of median incomes from the 2001 and 2006 censuses against median house price data from Quotable Value shows that in most centres, the rise in median house prices easily outstripped growth in median incomes during that five-year period.

Arcus Chief Economist Rozanna Wozniak says housing has become significantly less affordable in many centres. One of the few places that has consistently been one of the more affordable places to buy a home is Gore.

Although affordability (the ratio of median house prices to median incomes) fluctuates over time, Rozanna Wozniak doubts that there can be a convergence of the ratio to the point that houses will be almost as affordable in Auckland as they are in Gore.

“While there may be some logic to the catch-up and convergence argument, supply and demand must eventually prevail. Convergence can only occur if people are willing to move from Auckland to cheaper locations such as Gore.

“Centres experiencing rapid population growth such as Auckland and Queenstown will, over the longer term, continue to appreciate faster than towns that have a stagnant or shrinking population.”

 Editor’s note: Arcus Investment Management manages investment funds for Spicers. Arcus and Spicers are both subsidiaries of AXA New Zealand. 

Download Spicers Household Savings Indicators - March 2007

Ralph Little, Spicers Public Relations

09 374 1845