In the evolving landscape of investment opportunities, each generation approaches wealth-building differently .
New Zealand's investment behaviour has been particularly shaped by significant market failures; from the 1987 sharemarket crash to the finance company collapses of the 2008 Global Financial Crisis . The experience investors had with these left many gun-shy of investing in anything non-tangible; whereas younger generations who didn’t have skin in the game tend to see the opportunity of diversification .
A longstanding measure of success in New Zealand has been captured in what's commonly known as the ‘Bach, Boat, BMW' syndrome - a cultural aspiration that has shaped investment priorities for recent generations .
This mindset represents the traditional Kiwi dream (owning a primary residence, a holiday home or bach, a boat, and a luxury vehicle) as the pinnacle of achievement . While ‘BBB’ aspirations have driven individual wealth accumulation for many, it has paradoxically contributed to limitations in New Zealand's broader economic development .
The focus on acquiring these personal assets – and in particular, property – has diverted capital away from productive investments that could drive innovation, create jobs, and boost national prosperity .
Instead of passing on a business to generation, funding start-ups, investing in research and development, or supporting scale-up businesses that could create high-wage jobs and export earnings, significant portions of New Zealand's investment capital have been tied up in holiday homes and recreational assets that don't contribute meaningfully to economic productivity .
And to make up the lack of investment in our own economy, Kiwis have long been moving the productivity needle by working longer hours .
The Property Exception - And Its Recent Challenge
New Zealand has mostly stood apart from other developed nations by never experiencing prolonged property market declines – until now .
While countries like Ireland, the UK, and the USA have weathered significant property market corrections, New Zealand's residential property market had previously maintained remarkable resilience .
The current market represents a turning point, with some Wellington suburbs and North Island rural areas seeing values decline by up to 32% from their 2021 peaks, challenging long-held beliefs about property's invulnerability .[i]
Baby Boomers: The Property Pioneers
Baby Boomers (born 1946-1964) have maintained a conservative approach to investing, achieving the traditional Kiwi success markers of house, bach, boat, and BMW . Their strategy centres on tangible assets, particularly directly owned real estate, which rewarded them through multiple property booms in the 1980s, 90s, and early 2020s .
Many Boomers are now experiencing their first significant property market correction – meaning what might have always worked in past isn’t looking so certain, and their worldview may be challenged .
Gen X: The Slow Shift
Generation X (born 1965-1980) represents a bridge between traditional and modern investment approaches .
While many aspired to the traditional 'bach, boat, BMW'[ii] model of success, rising property prices and changing economic realities have forced a reconsideration of this framework . Their growing embrace of diversified investment portfolios, including equities, managed funds, and ETFs, suggests a gradual shift away from the asset-accumulation mindset of previous generations .
The current property market decline may actually accelerate Gen X's trend toward portfolio diversification, as they witness firsthand that even real estate isn't immune to significant market corrections . This generation's more balanced approach to wealth creation might herald a broader shift in New Zealand's investment culture .
Millennials: The Forced Innovators
Economic circumstances have largely dictated Millennial (born 1981-1996) investment strategies, marking a departure from previous generations .
While many grew up with the classic aspirations of their parents, achieving even home ownership has proven challenging – leading to more innovative approaches to wealth creation .
Their focus has shifted to sustainable investments, ethical returns, and portfolio diversity, potentially benefiting New Zealand's economy through greater willingness to consider productive investments .
Gen Z: The Digital Natives
Gen Z (born 1997-2012) largely rejects the traditional paradigm from the outset, recognizing it as increasingly unattainable and perhaps undesirable .
Their investment strategies reflect a more global outlook, emphasizing sustainable returns and social impact over asset accumulation .
Their comfort with digital assets, international markets, and innovative investment vehicles might help redirect capital toward more productive enterprises .
While the old standard of ‘success’ markers served individual NZ investors well in previous decades, the changing economic landscape demands a broader perspective . Future success might be better measured by contribution to economic productivity and sustainable returns rather than asset accumulation alone – a thought which may be prompted in many minds with the property market as it is .
The transition from a 'house, bach, boat, BMW' mindset to a more sophisticated investment approach is already underway . Part of it is due to age and shifts in generational thinking, but the economic straits of the present and recent past can’t be discounted either .
For New Zealand to thrive in an increasingly competitive global economy, this evolution in investment thinking may prove crucial .
Success in the future might depend on directing more capital toward productive investments to drive innovation and economic growth, while still providing attractive returns for individual investors . A balanced approach like this could help create a more resilient and prosperous economy, combining traditional wisdom with new opportunities .
And unlike previous generations, who often took a DIY approach to investing, younger investors are increasingly seeking professional guidance . This reflects both their time-poor reality and specialised career focus - while they may be experts in their own fields, they recognise the complexity of modern investing deserves its own expertise .
So, what’s next? The instinct to focus on tangible assets remains embedded in our culture like a nail in a fence (pinning some no. 8 wire down, of course ). But if you have been thinking of a new approach, you need not go it alone . Consulting a trusted financial adviser is a great start . They can help you develop a strategy help you reach your goals .
The shift from purely asset-based investing to a more diversified approach can seem daunting, but it’s one that considers both wealth preservation and economic growth – two things that will make your life (and the life of generations to come) easier in the long run .
· Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions. Article no. 379.
· The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
[i] https://www.opespartners.co.nz/property-markets
[ii] https://croakingcassandra.com/2015/04/24/boat-bach-and-bmw-really/
