There's been a nasty surprise for those who took it for granted that they could sit tight and let the housing boom increase their net worth.
Spicers' latest Household Savings Indicators report today shows the net worth of the average New Zealand household fell $4,900 during the December2007 quarter following an increase of $1,500 the previous quarter.
It was the first such fall in seven years.
The decline was attributable to an estimated 0.7 per cent fall in house prices and a solid 2.7 per cent rise in debt levels.
Arcus Investment Management Chief Economist Rozanna Wozniak, an economic adviser to Spicers, says despite average household net worth soaring $165,000 to $372,800 over the last five years, households need to remain cautious.
"Subdued conditions in the housing sector are likely to remain for some time. Some homeowners are already feeling the effects through higher mortgage interest rates and a tightening in lending standards."
"Our suggestion is to think carefully before committing to more borrowing. Now is not a good time to be drawing down on existing home equity to fund consumption."
Spicers Chief Executive Officer Gordon Noble-Campbell says low levels of unemployment will ensure most New Zealanders are financially secure and require little more than a bit of belt-tightening.
"However, some latecomers to the housing boom who have borrowed excessively may be faced with the more challenging financial mix of increasing debt and weaker house prices. This will put a strain on household budgets."
The report also revealed household financial assets rose 0.4 per cent during the December quarter, with a $2.2 billion reduction in private shareholdings offset by a $2.4 billion increase in bank deposits.
* Spicers Household Savings Indicators report is published quarterly and can be seen on the Spicers website.
