Published 17 December 2007
Spicers’ latest household savings indicators report shows the net worth of the average New Zealand household increased $8500 (2.6%) during the September quarter and by $43,200 for the year, to $383,400.
Arcus Investment Management chief economist Rozanna Wozniak, who is an economist for Spicers, said last week the negative effect of a slowing in the pace of house price growth was largely offset by a slight reduction in debt accumulation. Liabilities increased 2.3%, down from 3.2% the previous quarter.
“We hope the cooling in debt accumulation is a taste of things to come, particularly given the uncertain outlook for house prices. If house price growth continues to slow alongside skyrocketing debt levels, declines in net worth would be likely.”
Ms Wozniak said household assets increased 2.5% for the quarter, compared to 2.8% the previous quarter.
“Bank deposits were a key growth area, up 11.7% or $8.8 billion for the year, reflecting the ongoing uncertainty in the finance company sector.”
Ms Wosniak said 5 years of strong capital gains had left most New Zealanders in a secure financial position: “High interest rates and a possible modest decline in house prices need not cause undue concern as long as borrowers haven’t stretched their budgets to the limit…..
“Households that are most vulnerable include owners of hard-to-sell shoebox-sized apartments, homeowners exposed to the property developer/finance company sectors and latecomers to the market with high levels of borrowing who haven’t left a buffer for the unexpected.”
On a positive note, Ms Wozniak said the economy was receiving significant stimulus from fiscal spending & high dairy incomes: “For much of the country, these 2 effects will be less direct & visible than the negative impact of high mortgage interest rates, a slowing housing market & very high petrol prices. We do not believe these positive factors will prevent the current slowdown in the housing sector from continuing.”
Attribution: Company statement, story written by Bob Dey for this website.