Household wealth falls €6bn


THE COMBINED wealth of all households in Ireland fell by €6 billion in the first quarter of 2012. The decline, however, was one of the smallest quarterly falls since the recession began.

The aggregate “net worth” of households stood at €448 billion at the end of March, equivalent to €99,875 a person on average.

This is down from a peak of €724 billion in the second quarter of 2007. Since then, household net worth has fallen in every quarter bar one.

The cumulative decline since the peak stood at 38 per cent in the first quarter of this year.

The figures, published yesterday by the Central Bank, include details on the components of household balance sheets – assets (both housing and financial) and liabilities (mostly mortgage debt).

As has been the case since the recession began, changes in housing wealth continued to account for most of the change in household balance sheets.

In the first quarter, a €14 billion decline in the value of households’ property assets was recorded, bringing the value of all housing assets to €328 billion. This is down from a peak at the end of 2007 of €609 billion.

Households’ financial assets, by contrast, have maintained their value over the course of the recession.

In the first quarter of 2012, these were worth €308 billion, a €5 billion increase over three months.

At their all-time peak, exactly four years earlier, households’ total financial assets were only marginally higher at €315 billion.

Financial assets include cash, bank deposits, pensions, insurance funds and company shares.

On the liabilities side of the balance sheet, the new figures show that households continued to pay down significant amounts of debt, a process that has continued uninterrupted over the past 13 quarters.

Total debt was reduced by €3 billion quarter-on-quarter as households use more of their incomes to pay down debt. The amount owed by all households in the first quarter of 2012 stood at €188 billion, equivalent to €42,030 per person. At its highest point, in the final quarter of 2008, household debt stood at €214 billion.

Yesterday’s figures also give the aggregate balance sheets of companies, financial institutions and the State.

In contrast to households, companies in non-financial businesses continued to expand their balance sheets in the first quarter of the year. Moreover, their aggregate net worth position deteriorated as the increase in their liabilities in the first quarter exceeded the rise in asset values.

Corporate debt levels fell back very slightly in the first quarter, after rising to an all-time peak of €352 billion in the final quarter of last year.

The Central Bank stated that the increase in debt levels in the second half of last year was driven by the multinational sector.

Moreover, debt as a percentage of total liabilities (an indicator of how sustainable debt levels are) is now lower than the average over the past decade, at 40 per cent.

The Government’s balance sheet position continued to deteriorate in the first quarter of 2012, with its liabilities reaching a new all-time record of €187 billion. This represented an increase of €13.4 billion on the previous quarter.

The value of the State’s financial assets increased slightly on the quarter but not by nearly enough to offset the growth in liabilities.

The Government’s net worth thus moved deeper into negative territory, to stand at €117 billion in the first quarter of 2012.