Increasing house prices have made many Kiwis richer
This might surprise you, but you’re probably one of the top 10% wealthiest people in the world. And if you own a house in a nice Auckland suburb without a mortgage, you might even make it to the top 1%.
Recent figures showed that New Zealanders had the fastest rise in mean wealth per adult in the world between 2020-2021.
According to recent data from Credit Suisse, New Zealand’s mean wealth per adult increased by US$114,290 (NZ$202,000) to US$472,150, while the median lifted to US$231,260, up NZ$57,920, ranking it third globally, Stuff reported.
Boosting Kiwis up the world rankings was the combination of rapidly rising house prices and a strong currency last year, the data showed.
In 2021, there were 347,000 US-dollar millionaires in New Zealand – that’s 113,000 more than the previous year. Globally, there were 62.5 million.
New Zealand was among the top 10 in terms of the biggest growth in millionaires in 2021. The country was home to 2.126 million people in the top 10% richest globally and 281,000 in the top 1%.
Globally, the top 1% now have 45.6% of the world’s wealth, up from 43.9% in 2019.
To make it to the wealthiest 10% in the world, you need to have an individual net wealth of US$138,346. For the 1%, the bar is US$1.147 million. Net wealth is calculated by subtracting debt from the total value of assets owned by a person, Stuff reported.
Jarrod Kerr, chief economist at Kiwibank, said the significant increase in the value of houses drove the increase in Kiwis’ wealth.
Many people, he said, also invested money in managed funds, which had a “fantastic” year last year, while strong government and central bank stimulus had pushed up share markets around the world, including in New Zealand.
Read next: NZ house prices to keep falling over summer – ANZ
“There was a rampant rise in house prices. Kiwis love housing, and it’s most people’s biggest asset,” Kerr told Stuff. “They all increased… A lot of wealthy people out there have money in shares, managed funds. They all did well. The wealthier you are, the more your assets went up.”
And while Kiwis might not feel wealthy, New Zealand was quite an advanced economy compared to most around the world, he said.
“New Zealand is not a poor nation,” Kerr said. “We like to think of ourselves as a small, poorer cousin to Australia, but we do punch above our weight in a lot of areas.”
House prices falling and share-market volatility would help reduce the inequality that rose during COVID-19 but falls to date had not obliterated the gains experienced, he said.
“It’s clear that the massive stimulus from government and the central bank drove this,” Kerr said. “It was by design. They wanted to inflate their way out of it, and they have more than done that.”
According to Stats NZ, New Zealanders’ household median net worth was at $397,000 in mid-2021, up 21% from 2018. The data also showed the top 20% of Kiwi households held 69% of the country’s net worth.
Owner-occupied houses and other real estate investments comprised 43% of assets.
A person’s net worth would typically increase as someone became older, Stats NZ said, with those aged 15 to 24 having the least, at $3,000 median per person, while those at traditional retirement age reaching $433,000.
Europeans had the highest individual median net worth at $151,000 compared to $42,000 for Māori, Stuff reported.
Miles Workman, senior economist at ANZ, said the Stats NZ data might not have yet fully covered the extent of the COVID-19 house price surge.
“These questions will also throw up big, and very important, questions about the future of tax policy,” Workman told Stuff. “The ageing population is expected to add significantly to demand for government services, and that may need to be funded from higher government revenues – tax – at some point, or be met with reduced government services elsewhere, such as lifting the retirement age. The more wealth concentration that does occur, perhaps the more likely voters will find some kind of wealth tax palatable, particularly if the alternative is higher income tax. Indeed, the top 1% of income earners from salary and wages are possibly a very different bunch to the top 1% in wealth terms. And that could become a more important consideration over time as policymakers and the public evaluate the fairness of the tax system. The debate may be in hibernation for now, but I don’t think it’s over.”
