There were 2587 individuals in New Zealand who qualify as having "ultra high net worth individual" status. File photo. Photo: 123RF
If you want to get rich, you'd better start early - and potentially have a bit of luck on your side.
Here's the rundown on what it takes to be among the wealthiest people in New Zealand now, and how you might hope to get there.
What's wealthy anyway?
Data from real estate consultancy Knight Frank, included in its latest wealth report, showed that in 2023, there were 2587 individuals in New Zealand who qualified for its "ultra high net worth individual" status - with wealth of at least US$30 million.
Stats NZ said in 2021 the top 1 percent of New Zealand households had net wealth - assets minus debts - of at least $7.59 million. That compares to median net worth for all households of $397,000.
That data will be updated again next year and it remains to be seen how much that figure will have moved. While property prices are 16.4 percent below their peak - and that 2021 data includes most of the runup to the peak, - the S&P 500 is up 31 percent since that time and business values have probably not fallen as far as property prices.
Can a normal person get there?
Economist Ed McKnight, of Opes Partners, assuming $7.59m remained the most reasonable ballpark figure for the top 1 percent, ran the numbers to determine what it would take to invest your way there.
He said someone using only the US stock market would have had to invest $1704 a week, every week, since June 2004. They would have to invest every Wednesday that markets were open, and increase the amount invested in line with increases in household income.
"So you start with $1704 a week. Then next year, you increase that to $1786 a week, and it increases every year. For context, $1704 a week in 2004 is $2824 a week in today's money. That's $146,848 a year in today's money. Which is well above the average household income of around $132,000 according to Infometrics. So not doable for most people."
He said, over 20 years, 35 percent of the money accumulated via this method would have come from investments and 65 percent would have been investment returns.
If you wanted to accumulate the amount over 10 years, you would have had to start investing $6544 a week and do that every week. In that case, 55 percent of the money would come from investments and 45 percent from returns.
"This shows a very important principle that the longer you are in the market, the easier it is to grow your wealth because your returns start to compound. You earn a return on your money, then you earn a return on the return. Said another way, you use your money to make money."
Someone could invest in property to get to the wealth goal, too, he said.
"Back in 2004 the median house in New Zealand sold for around $250,000. If we track that against the REINZ house price index, you would have had to buy a house every nine months to get into the top 1 percent. That means over the last 20 years you would have bought 27 houses.
"You would have made money on some and lost money on others. But just through the capital growth you would have made just over $7.6m, enough to get into the top 1 percent. If you wanted to start in 2014 and do it in 10 years then you would need to buy 61 properties, roughly one every two or three months."
The power of time
McKnight said this "thought experiment" would be impractical in reality for most people but highlighted the value of time for investors.
"It's easier to build wealth when you are in the market for the long term. If you are serious about growing your wealth, you wouldn't just do it through property or shares, you would use a mix of different assets. One big one is growing and selling a business. That is a relatively well established path to growing wealth in New Zealand."
He said even if someone started following the plan and invested $2824 a week from now, it would not guarantee they would get into the top 1 percent because the wealth of the top 1 percent could grow faster than the investment did.
"And there is also an argument about whether getting into the top 1 percent should be someone's goal. It's probably more important for Kiwis to think about what level of wealth would make them happy, rather than just aiming for a large number to get into the top 1 percent."
Infometrics chief executive Brad Olsen said property had traditionally been a way that people would build wealth, but that was less of a sure bet into the future.
"If you went back a couple of years we wouldn't have been having this conversation - it was pretty clear cut that houses go up in price, sometimes a lot and if you get into a house you can make some serious coin. Where house prices are at the moment with a commitment by government to open greater levels of supply and similar, that should dampen expectations around house price growth."
He said if it was a bit more difficult to make money in property it might prompt people to invest in other things, such as businesses. "It could spin into new investment models… I do think it's healthy seeing those drivers of wealth not as iron clad or gold plated as they might have been previously."
He said there was evidence that the house price rises of the pandemic period had flattened some of the difference between middle-income households and the top tier.
"It's a slightly perverse way of looking at it because the bottom group [non-homeowners] didn't shift much in wealth over that time."
Olsen agreed it was worth asking whether being in the 1 percent should be a target. "Money doesn't make you happy, that's probably true, but gosh, it gives you a lot more options. We've all got a complicated relationship with money."
He said the country might be better off to consider what the minimum reasonable level of wealth or income was to live a decent lifestyle.
"In a sense that's a lot more motivating."
But he said the debate of what to include in the living wage calculations showed the difficulty of quantifying what was reasonable to most people.
Olsen said it was clear that it was time in the market rather than timing the market that helped people growth wealth.
"That's increasingly important...the later you leave it, the less you get and the harder it becomes."
