Net worth of Irish households jumps 60% as property prices surge

Central Bank data shows household debt as a proportion of disposable income also falls

Central Bank figures show net worth rose by €16.9 billion in the second quarter, reflecting a substantial increase in the value of housing assets. Photograph: Dan Kitwood/Getty Images

Central Bank figures show net worth rose by €16.9 billion in the second quarter, reflecting a substantial increase in the value of housing assets. Photograph: Dan Kitwood/Getty Images

 

The net worth of Irish households has risen by nearly 60 per cent since 2012 as a result of surging property prices, which have increased house asset values.

Figures from the Central Bank show the net worth of Irish households stood at €686.3 billion in the second quarter of 2017, up from €430 billion five years ago, and just 4.6 per cent lower than its peak of €719.6 billion in the second quarter of 2007.

The figures show net worth rose by €16.9 billion or 2.5 per cent in the second quarter of this year alone, reflecting a substantial increase in housing assets (€16.1 billion) and a decrease of liabilities (€1.5 billion) over the quarter, albeit this was offset by a decline in financial assets of €0.7 billion.

The improvement in household net worth is almost matched by improving debt metrics.

Debt

Irish household debt as a proportion of disposable income fell by 50 per cent between 2013 and June of this year, compared with just 3.3 per cent in the euro area as a whole.

The figures show overall Irish household debt stood at €141.7 billion or €29,576 per capita in June, which equated to 145.2 per cent of disposable income.

Despite the improvement, Irish households remained the fourth most indebted in the European Union behind Denmark,the Netherlands and Sweden.

Private-sector debt as a proportion of gross domestic product (GDP) fell 17.2 per cent over the quarter to 265.3 per cent, which was the lowest level since the beginning of the financial crisis.

The Central Bank said the fall in private-sector debt reflected both reductions in the stock of debt owed by both firms – excluding banks and other financial companies – and households, and an increase in annualised GDP, which has jumped significantly in recent years.

On a year-on-year basis, private-sector debt as a proportion of GDP has fallen by 51.6 per cent.

Wealth

The Central Bank, however, cautioned that private-sector debt in Ireland was significantly influenced by multinationals and that restructuring by these entities has resulted in extremely large movements in Irish private-sector debt, particularly from 2014 onwards.

The figures showed Government debt rose during second quarter of 2017 by €2.4 billion to €232.3 billion primarily due to a €3 billion increase in Government-issued debt securities, which was offset by a €0.7 billion reduction in Government loan liabilities.

However, the net financial wealth of Government increased by €2.5 billion over the quarter, as Government assets increased faster than liabilities.

Government holdings of equity shares fell by €2.8 billion during the quarter, a reduction of 7.1 per cent compared with the previous quarter, primarily due to the sale of part of the Government’s equity stake in Allied Irish Banks.