Economy

New Zealand’s world-beating jump in wealth down to ‘rise of landed gentry’, says economist | New Zealand

New Zealanders have topped the world for the biggest annual jump in wealth, however one prominent economist warned the figures were further evidence of growing inequality in a country that is experiencing “a rise of the landed gentry”.

The global wealth report by investment bank Credit Suisse shows New Zealand experienced the biggest spike in average wealth per adult, ballooning by US$114,000 (NZ$193,248) in 2020 to bring the total average wealth per adult to US$472,153 in 2021 – a 32% year-on-year increase.

There were 347,000 people in the country with more than US$1m to their name in 2021, the report said. About 2.1 million New Zealanders – out of a total population of just over 5 million – are in the top 10% of global wealth holders. About 281,000 of those are in the top 1%.

Of the $114,000 increase the report noted, 60% had come via housing, with the other 40% due to global financial markets doing well, said Shamubeel Eaqub, a leading New Zealand economist.

“The increase in house prices has been extraordinary,” he said. “But with only roughly half of New Zealand adults owning their own home, “the increasing wealth was very unequally distributed.”

Eaqub refers to it as the “rise of the landed gentry, with wealth and housing opportunities becoming more hereditary”.

For years, New Zealand has been plagued by a runaway housing market. The cities of Wellington and Auckland have some of the least affordable property markets in the world, and homeownership rates have been falling since the early 1990s across all age brackets, but especially for people in their 20s and 30s. House values soared during the first two years of the pandemic, while wages remained stagnant. By August 2021, house prices had increased by 25% over the previous 12 months alone – on top of already extraordinarily high prices.

The problem with focusing on the averages and aggregates of figures like these, Eaqub added, was that it could miss the growing divide between renters and owners, and the haves and the have-nots in New Zealand.

With roughly two-thirds of New Zealanders’ assets held in housing, it was unsurprising that housing wealth had boomed during the pandemic, Eaqub said, adding that just because the market was slowing now “doesn’t mean those inequalities aren’t persistent.”

The Credit Suisse report paints a broad picture of individual wealth across the globe, with the number of “ultra high net worth” (UHNW) people – or those with assets of more than US$50m – swelling by 46,000 last year to a record 218,200 in 2021 as the super-rich benefited from soaring house prices and booming stock markets.

“The strong rise in financial assets resulted in an increase in inequality in 2021,” said the bank’s report. “The rise in inequality is probably due to the surge in the value of financial assets during the Covid-19 pandemic.”

The number of people in the UHNW bracket has increased by more than 50% over the past two years.

New Zealand was followed by the US, Australia, Canada and Taiwan. Those who experienced the biggest losses were Japan, Italy and Belgium.

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