EXECUTIVE SUMMARY
Many New Zealanders are currently without an
ownership stake, and find it difficult to build wealth over their lifetime.
The median household wealth in New Zealand is
just $68,300, with 800,000 New Zealanders owning less than $20,000. And 16%
of New Zealand households have negative wealth, where their liabilities
exceed their assets.
It is also likely that the difficulties that
New Zealanders face with respect to accumulating wealth will become more
pronounced. In particular, young New Zealanders face new pressures, like
student loan debt and declining home affordability, which constrain their
ability to accumulate wealth. This means that there may be an increasing
number of New Zealanders without an ownership stake in the economy.
Asset ownership – or the lack
of asset ownership – has profound effects on life outcomes for
individuals and for the well-being of communities
The international and New Zealand evidence on
the economic and social importance of asset ownership to individuals and
communities strongly suggests that this situation is cause for serious
concern. Asset ownership has a significant effect on the economic and social
outcomes for individuals and for communities.
For individuals, asset ownership provides
direct financial benefits in terms of the returns generated. As a result,
those who own assets are in a much better position to get ahead financially
than those who do not own assets. In this sense, wealth inequality is
frequently self-perpetuating. Further, the benefits from economic growth are
often capitalised into asset values, so that asset owners benefit
disproportionately from growth.
Those who own assets – like real estate –
get ahead while those without assets may get priced out of the market. And
accessing these return opportunities often requires some initial asset
ownership. For example, a deposit is required to buy a home, and initial
equity capital is generally required to start a new business. It takes money
to make money. Assets also provide a buffer, which allows people to better
manage risks. The insurance provided by asset ownership is becoming
increasingly important as the risks that people face become more diverse and
the extent of social insurance provided by the government reduces.
The ability to access opportunity and get
ahead, and to better manage risks, also generates powerful social and
psychological benefits. Asset ownership gives people a sense of control and
independence, allows them to focus on the future to a much greater extent,
and is an increasingly important determinant of meaningful participation in
society.
Asset ownership has been strongly linked to
better health and employment outcomes, quality of life, marital stability,
and educational outcomes for children.
Encouraging asset ownership seems an
important way in which to build a genuinely inclusive economy.
Widespread asset ownership also has
significant community-wide benefits in terms of generating social cohesion
and a feeling that everyone has an opportunity to get ahead and build a
future. To the extent that people own a house, a business, or financial
assets, they are better able to participate meaningfully in society. Indeed,
the evidence shows that people who own assets tend to be more involved in
their communities. Conversely, communities in which many people do have an
ownership stake – and where people feel marginalised –tend to experience
worse outcomes.
Many of these benefits have long been
understood and have motivated policies across the world, including in
post-war New Zealand. But the strength of the evidence, and the importance
of asset ownership, seems to be increasing. The implication is that creating
an ownership society in New Zealand – ensuring that many more New
Zealanders have an ownership stake – will have significant effects on the
ability of New Zealanders to participate meaningfully in society.
The full report may be downloaded at: http://www.nzinstitute.org/index.php/ownershipsociety/papers/
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2. Benefits of Home Ownership
