By BRIAN FALLOW AND NZPA
Households' net worth rose 1 per cent in the March quarter, entirely due to rising house prices.
The Westpac household savings indicators, compiled by NZIER and Morningstar, recorded an increase in net worth (assets minus liabilities) of $2.2 billion to $224 billion in the quarter. Over the year ended March it rose $13.3 billion or 6.3 per cent.
The average net worth of each household was $161,962, a rise of $7836 from the same period last year.
At the end of March, the net wealth per capita was $56,109, up $2405 from last year.
The quarter saw an increase of $5.1 billion or 2.5 per cent in the value of the housing stock, offset by a $600 million fall in the value of financial assets and $2.2 billion debt increase.
Over the year household debt rose 9.9 per cent to $77 billion.
As a percentage of household wealth, debt - 90.6 per cent of which is housing related - has more than doubled since the start of the 1990s, from 15 per cent to 34 per cent.
Cash in the bank increased $205 million or 0.4 per cent, the smallest quarterly increase in two years, but that was more than offset by a $515 million decline in the amount entrusted to fund managers and a $295 million drop in other financial assets, such as directly held shares.
NZIER senior research economist Doug Steel said that after more than a year of strong income growth it was not surprising to see household net worth rise on the back of substantial gains in asset values.
"Housing continues to be the asset of choice, especially with ... strong net migrant inflows."
Morningstar NZ general manager Ross Weaver said a drop in the value of managed funds, which shrank 1.4 per cent, could be pinned to "geo-political negatives" such as the war on Iraq and poor corporate earnings.
"At the same time there has been a global flight to quality, to more tangible assets such as housing, helped in no small way by historically low mortgage rates in many countries."
Westpac chief economist Brendan O'Donovan said the rise in household debt was probably due in part to lower interest rates.
"Recent actions by the Reserve Bank to cut interest rates, with a likelihood of more to come, have mitigated the risks posed by higher household leverage."
Net wealth up thanks to housing
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