The recent sharp rise in house prices has to date made New Zealand households considerably more wealthy, at least on paper. To illustrate that proposition, the Reserve Bank’s own estimate of the household sector’s net wealth (including the current market value of housing) stood at $ billion (about 3 times annual GDP) at the end of 2003.
That was up from $ billion (or about 2.5 times annual GDP) in 2001. This improvement in net wealth was despite households taking on an extra $ billion worth of debt over the same period. Surely, we would need a very large and unprecedented fall in house prices to reverse that improvement?