In today's email, we detail the statistics out showing the increasing divide in wealth and the opportunity for financial mobility dictated by home ownership. And, speaking of statistics, we also look at the failure of Statistics House in the Kaikoura earthquake.
1. A landed gentry worth $1.2 trillion
New Zealand has seen itself as an egalitarian society, but new statistics out last week show how wealth and opportunity have diverged dramatically around the pivot of who owns property and who rents in the last 20 years.
The children of renters cannot now easily get on to the ladder to financial security without marrying into a new landed gentry that is worth $1.2 trillion because property values have risen $781 billion since 1997.
And unlike in the mid 2000s, the newly wealthy class of home owners, and often multiple home owners, are now choosing to hold to that wealth, rather than spend it. Property owners have stopped using their houses like ATMs, partly because they are saving more as they age, and partly because regulators have made it much harder to withdraw equity from their homes.
New Zealand's households have actually had a fantastic decade since the Global Financial Crisis, or at least those owning property have. A new set of national statistics shows household net worth has risen more than $323 billion to $1.24 trillion over the last eight years, while rents have risen 30 percent and faster than average wage growth of 25 percent.
Statistics New Zealand released its new series of annual balance sheets on Friday, which showed how household wealth changed between 2007 and 2015. The driving force in the improvement in net worth was the rise in property values over that time.
The figures echo a household balance sheet series compiled by the Reserve Bank, which shows an even greater improvement over the last two decades.
The Reserve Bank series starts in December 1998 and shows household net worth has risen from $349 billion to $1.21 trillion by the September quarter of 2016, due largely to a rise in the value of houses and land from $221 billion to $1.002 trillion.
2. Housing debt up, but by much less
Housing debt has risen quickly too over that time, but not nearly as much, hence the more than trebling of net worth. Home loans rose from $53 billion in 1998 to $230 billion between 1998 and 2016.
Fresh research from the Reserve Bank also shows that property-owning households are now effectively hoarding that extra wealth, rather than spending it.
From 2004 to 2008 households withdraw equity from their households by borrowing against the higher value of their homes to supplement their incomes from wages.
3. Not using houses as ATMs
The Reserve Bank released an analytical note from Martin Wong last week that looked at how the wealth effect of higher house values had translated into household consumption.
Wong found that per capita consumption growth had moderated since the Global Financial Crisis.
"The modest growth in per capita consumption has coincided with an increase in the household saving rate, a slowing in credit growth, and a positive injection of equity into the housing sector by households," Wong wrote.
Wong wrote the change could be because home owners think their capital gains may not grow so fast in future, or it may be because home owners want pay down debt.
Most of those home owners are in their late 40s, 50s and 60s, and are keener to save as they near retirement. The newly wealthy intend to stay that way.
4. While student debt rises...
Younger renters with student debt will struggle to gather that same wealth over the next 20 years, particularly if they cannot ask their parents or families for deposits.
The same household balance sheet figures from the Reserve Bank show student loans rose from $2.65 billion to $15.3 billion between 1998 and 2016.
5. Stats NZ building
Elsewhere, the big news around Wellington on Friday was the release of MBIE's investigation into the partial failure of the lower floor segments of Statistics NZ House during the Kaikoura earthquake.
The 2005 building failed because of a design flaw that didn't take into account beam elongation in buildings with pre-cast floor slabs and multi-bay frames. MBIE is now following up to see how many other buildings have the same flawed design.
Building and Construction Minister Nick Smith said the Concrete Structures Standard would be amended to ensure new buildings were designed to cope with beam elongation during long earthquakes.
He also said he had asked MBIE to investigate whether it needed extra powers under the Building Act to follow up on such designed deficiencies.
6. Business confidence fell
ANZ released its monthly business confidence survey results on Friday, which showed a net 11 percent of businesses were confident about the wider business outlook for the year ahead -- down six percentage points from the previous month and back to long term averages.
"Sentiment dropped sharply in retailing and construction, and turned negative within the agriculture sector," ANZ reported.
Businesses were however still confident about their own business outlooks, with a net 38.8 percent being confident in March, up from 37.3 percent the previous month.
7. Building consents up in Auckland
Building consents rebounded somewhat in February, Statistics New Zealand reported on Friday, including in Auckland.
Dwelling consents in Auckland rose from 512 in January to 800 in February, which was also a rise from 787 in February a year ago.
However, the trend for consents for Auckland continued to fall in February, having fallen from a high in September of 884 to 796.
The 10,045 consents issued in the year to February remains well below the 13,000 a year seen as necessary to keep up with population growth. The actual number of houses completed for occupation in the last year was closer to 8,000.
8. Coming up...
Prime Minister Bill English is expected to hold his weekly post-cabinet news conference this afternoon.
Parliament resumes on Tuesday after a one-week break.
The NZIER releases its March quarter survey of business opinion on Tuesday morning.
Have a great day.