KEY POINTS:
Slowing house prices have cut the rate of annual increase in net household wealth to its lowest level in four years, but the rate was still 9.8 per cent in the 12 months to September, said the latest quarterly report from Spicers Wealth Management released yesterday.
It said net household wealth increased by 2.2 per cent for the September quarter and the average household made a net gain of $6200 to $342,000.
That compared with a revised gain of just $1900 the previous quarter, after a $7000 June quarter rise was previously reported.
The rise between the June and September quarters reflected a higher rate of growth in house prices - estimated at 2 per cent, up from just a 1 per cent rise in the June quarter.
But Spicers said that while the higher September quarter house price gain might seem like a "significant improvement" the last two quarters housing appreciation figures were the weakest results in five years.
The firm said different measures were giving conflicting signals over the real strength of the housing market. "Only time and further data will finally reveal the truth."
Debt continued to rise at a faster pace than asset values for the third consecutive quarter, Spicers said.
Economist Rozanna Wozniak of Arcus - which manages funds for Spicers - said net household wealth in areas where house prices declined in the June quarter may already be starting to drop backwards.
Wozniak included Whangarei, Gisborne, Hastings, Napier, Nelson, Central Otago, Queenstown Lakes and Dunedin as centres where losses might be occurring.
She said economic fundamentals suggested the housing market remained vulnerable. "The last five years have mistakenly led us to believe that rapid gains from housing have always been the norm. In fact, the last five years have been the exception."
She noted long periods where house prices stagnated or even declined, such as in the 1960s and 1970s when national house prices dropped in real terms.
Spicers' report said increasing caution was prudent and gave a warning that borrowing against rising house values to fund spending was now a more risky strategy.
"Fundamentals suggest that further weakness in the housing market lies ahead."
Meanwhile, Spicers said financial assets had increased by 8 per cent in the September year.
