Due to the Covid-led housing boom, New Zealanders’ total wealth increased by 32% in 2021. It’s one of the findings in Credit Suisse’s global wealth report, according to which the average wealth per NZ adult grew by NZ$176,000 to NZ$728,000.
Of course, that was before the property market downturn of 2022. But it goes to show just how reliant New Zealanders are to property trends.
Some key takeaways from the report
In 2021, global ‘real’ wealth (accounting for inflation) increased by 8.2%. The strong rise in asset prices meant inequality also increased. However, this is already being mitigated by a reversal of this trend in 2022, which has seen property prices decline significantly. Suisse Bank economists expect to see wealth inequality go back to pre-pandemic levels soon.
Interestingly, no country recorded a decline in house prices in 2021. Amongst those that saw the biggest house price gains were New Zealand (25%), Australia (31%), Saudi Arabia (34%) and Turkey (60%). New Zealand also saw the world’s biggest increase in wealth per adult, and in 2021 we ranked third overall for median wealth per adult.
As the report explains, while the health impact of Covid-19 was limited in both Australia and New Zealand, both countries experienced economic losses in 2020 due to lockdowns and reduced international trade. Then, GDP growth in 2021 made up for the 2020 losses, and the household savings rate jumped from 15.6% to 25.9%, which meant many were able to repay their debt faster or take on less debt.
How to build sustainable wealth
Household wealth and financial resilience go hand in hand. For example, having an emergency fund can make a difference at the best of times, and it certainly did during the pandemic. But as we’ve seen, ‘on paper’ wealth can also be quite volatile, reflecting swings in asset prices.
For wealth to be sustainable and maintained over time, it’s important to:
- Diversify: one example of this is to not over-rely on property as an investment. While property can be a stable and valuable asset, it’s also affected by market conditions. So if you have a significant portion of your wealth invested there, a downturn in the housing market can potentially have a big impact on your financial future.
- Focus on the long term: Short-term market movements are not a guarantee of longer-term trends. When it comes to building wealth, it’s crucial to ignore the short term (as much as possible) and keep the long term top of mind.
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Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.