Household wealth jumps by 74% since last recession – report

Irish households are better positioned to withstand a Covid-induced recession than they were at the time of the last financial crash, according to a new report from the Central Bank.

The net wealth of the median household has jumped by almost three quarters in five years and now stands at €179,200, largely because of rising house prices over the period and the fall in mortgage debt.

House prices have jumped by almost €100,000 in that time, or over 60 per cent, with the median family home in the State now worth €250,000

According to the data, Ireland saw the most rapid growth in household wealth over the five years and is now the fifth wealthiest state in the euro zone.

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The figures relate to 2018 and were gathered by the Central Statistics Office in its household finance and consumption survey. They compare with the previous survey which was carried out in 2013 in the teeth of the last recession.

The report relies on median household – the one that would be in the middle if all households were ranked according to wealth. It is seen as more representative than the average wealth figure which can be distorted by extremes of wealth or poverty.

It also shows that median gross household income jumped 18.5 per cent in the five years to 2018, hitting a new high of €47,000. The previous peak had been in 2007.

Ireland is also the only euro zone state where the share of net wealth held by the top 5 per cent has fallen according to the survey, which was carried out across the European Union.

Along with Hungary, it is the only country to see a drop in the share of wealth of the top 10 per cent of households. However, the most wealthy 10 per cent of households still control more than 50 per cent of household wealth. And the poorest 50 per cent of all households control just 6.8 per cent of the wealth, up from 4.5 per cent in 2013.

Resilient

The research, by David Horan, Reamonn Lydon and Tara McIndoe-Calder, shows that households were more resilient in 2018 than they were in 2013. Financial buffers had been built up and debt-to-income ratios had declined.

And while the data discussed in the paper clearly pre-dates the Covid-19 crisis, the authors argue that households were in a better position going into 2020 than they were after the 2008 recession.

“Our work indicates that, if house prices and/or incomes fall, we would not expect household debt to drag on spending in the same way as it did going into 2008,” they say, noting that households have rebuilt their balance sheets substantially since 2013 and also have more equity in their homes.

The data shows that the number of people owning their own homes fell from 70.5 per cent in 2013 to 68.8 per cent. It confirms other data that new homeowners are now likely to be older – 32 as against 29 in the run-up to the financial crash.

The survey of just under 4,800 households was conducted between April 2018 and January 2019.