Irish household wealth hit by stock market crash in March

The combined wealth of Irish households fell by €11 billion in the first quarter of 2020 with the Covid-19 pandemic triggering a major stock market crash in March.

Central Bank figures show household net worth fell by 1.4 per cent to €791 billion, down from a record high of €802 billion at the end of last year.

The slide was linked to a €14.1 billion drop in the value of financial assets held by households here, primarily due to decreases in the value of insurance and pension schemes.

The global spike in Covid-19 cases caused a major run on stocks in March, which had a knock-on effect on the value of insurance and pension schemes.

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Stock market values have recovered since with investors betting on a swifter-than-expected economic recovery.

The €791 billion broken down on a per capita basis equates to €160,730 per household.

The figures show housing assets rose to €541 billion, an increase of €1 billion over the quarter while household liabilities fell over the quarter, by €2.1 billion to €145 billion.

Household debt, meanwhile, fell by €2 billion during the three-month period, continuing the downward trend in the series, to stand at €133 billion.

This equates to €26,979 per capita. Household debt has decreased by 35 per cent, or €70.1 billion, since its peak of €202 billion in the third quarter of 2008.

Household debt as a proportion of disposable income fell by 3 percentage points, to stand at 111 per cent.

Disposable income

“The decline over the quarter was driven by an increase in household disposable income over the quarter, in addition to the decrease in debt,” the Central Bank said.

In contrast to the financial crisis, households this time around are not as indebted.

Private sector debt as a proportion of gross domestic product (GDP) decreased by 4.4 percentage points to stand at 219 per cent, the Central Bank said.

While debt overall is falling, it is still high by international standards.

Nonetheless, the Central Bank cautioned that private sector debt in the Republic is significantly influenced by the presence of large multinational corporations (MNCs) and that restructuring by these entities has resulted in extremely large movements in Irish private sector debt, particularly from 2014 onwards.