Assets trump salary for Kiwi investors

The Stake Ambition Report, which surveyed more than 1,000 non-retired New Zealanders, says getting a ‘good job’ and buying property to achieve financial security, are not seen as accessible or reliable as they once were.

Respondents to the survey put goods inflation, housing costs and slow wage growth as the top barriers to reaching their financial goals.

Nearly two-thirds (64%) felt they needed to earn more than $100,000 to live comfortably, and the majority (78%) of those in the median salary band ($48,000K - 70K), said they would need a salary of $80,000 or above. In the next year, 44% expected a salary increase of 1-5% and an alarming 22% expected no increase.

However, despite two thirds (68%) saying they faced financial strain due to wages not keeping up with inflation, 76% continued to invest throughout the past six months and more than two-thirds (67%) retained all their shares over the past year. Only 36% reduced allocations to savings or investments.

Stocks versus property

When asked whether assets, such as stocks and property, were more important than hard work in New Zealand today, almost twice as many respondents agreed than disagreed (1.9 times).

Respondents were almost five times more likely to point to the stock market (51%) as the most accessible way to build wealth compared to the property market (11%), but 73% said they would buy an investment property if they had the means.

Retiring and living off investments was the most common financial goal (56%), followed by boosting income (53%), travel (43%) and reducing working hours (32%). Definitions for financial success included being debt free (88%), home ownership (82%) and living in their chosen area (73%).

Stake CEO Jon Howie says given the property market’s increasing barriers to entry, people are looking for other routes to building wealth.

“Rather than simply waiting for things to get better, they are upskilling, delaying gratification and engaging with financial markets to supplement their hard work.”

And despite the impact of housing costs, goods inflation and slow wage growth, 80% of investors were moderately confident in their financial future, trusting their ability to determine their own success, he said.

Intergenerational wealth gap

Almost two thirds (60%) of respondents said they believe that the intergenerational wealth gap was holding young people back, and three in four (73%) were concerned that the gap was growing – including more than half of those over 65 (51%). The survey found that 28% of 18-34-year-olds have had significant financial help in their adult lives so far.

Howie says, New Zealand, like many nations, is set to experience a massive intergenerational wealth transfer, but not everyone will benefit.

“Our data shows that younger generations are proactively cutting down on discretionary spending to invest and grow their wealth, revealing an impressive amount of drive and ambition for improving their situation.”

Despite having comparatively less income than older age groups, the survey found that younger generations were maintaining their investment habits, with 78% of 18-24 year olds having invested in the last six months.

Four in five of those surveyed (82%) believed that most people will be working past 65 by the time they retire, which drove them to invest now. The survey found 60% of respondents checked their KiwiSaver balances once a month and one in two (49%) would use it to buy a property if they could.

Respondents favoured investing in individual NZX stocks (46%) in the past year, when compared to other listed assets. However, the NZX50's yearly loss of around 1% lagged far behind global markets, with the S&P 500 surging more than 25%.

“The research shows that investors have a home-bias, which could be impacting returns, but this is a common theme in other markets such as the UK and Australia, and not isolated to New Zealand. People often think it’s difficult or complex to invest overseas, but this attitude is starting to shift as barriers to investing have been broken down — particularly with younger investors.”

Only 10% said their financial skills came from school. Most said they learned through friends and family (58%), followed by self-directed methods such as social media platforms (41%), and books (38%).

Asked about the role financial advice could play here, Howie says advisers have their place and are great for those that can afford them, but they’re financially out of reach for many in NZ.