The Momentum / UNISA Household Wealth Index 2nd Quarter 2014
The value of South African households’ net wealth increased strongly in the second quarter of 2014 (Q2 2014) despite lacklustre domestic economic growth. According to the Momentum/UNISA Household Wealth Index, South African households’ net wealth increased by 36.4% on a quarter on quarter seasonally adjusted and annualised basis (QoQSAA) during Q2 2014. Compared to a year ago (Q2 2013), South African household net wealth was 22.4% higher.
In monetary terms, South African households’ net wealth (assets minus liabilities) was estimated at R7 875 billion (R7.875 trillion) at the end of Q2 2014.This is R587 billion more than the revised estimate of R7 287 billion (previously estimated at R7 309 billion) at the end of Q1 2014. This means that the ratio of household net wealth to disposable income increased to 359% at the end of Q2 2014 from a revised 339% at the end of Q1 2014.
The growth in households’ net wealth was driven by household assets outpacing the increase in household liabilities. The value of household assets increased at a QoQSAA pace of 29.9% in Q2 2014 to R9 494 billion, while liabilities increased by 3.2% to R1 619 billion. On a year on year basis, the value of household assets was 19.2% higher, while household liabilities were 5.6% more.
The value of household assets was mainly driven by an increase in households’ financial assets – specifically investments in listed shares on the JSE, directly, or indirectly via their retirement funds, as well as the value of their investments in unlisted companies. For instance, the JSE All Share Index (Alsi) was 29.4%higher at the end of Q2 2014 compared to Q2 2013.The increase in household liabilities, albeit at a slower pace, was driven by asset-backed credit, with unsecured debt increasing at a slower pace.
However, the outlook for Q3 2014 is less rosy. Current indications of a decrease in the value of household net wealth in real terms are possibly as a result of, among others, the mediocre performance of listed shares.
Highlights
• Household net wealth increased by6.4% on a quarter on quarter seasonally adjusted and annualised basis (QoQSAA) during Q2 2014.
• On a year on year basis, household net wealth was 22.4% higher in Q2 2014.
• The ratio of household net wealth to disposable income increased to 359% compared to 339% at the end of Q1 2014 (317% in Q2 2013).
• Although this ratio is increasing, it is 250 to 400 percentage points lower than in the USA, Europe and Japan, meaning that, collectively, households in these countries are much wealthier than in South Africa.
• The value of South African household net wealth was estimated at R7 875 billion at the end of Q2 2014. This is R587 billion more than the R7 287 billion at the end of Q1 2014.
• Household assets increased 29.9% on a QoQSAA basis in Q2 2014 and 19.2% year on year (YoY). In real terms (2005 prices) household assets grew by 20.0% QoQSAA and 12.4% YoY.
• Household liabilities grew at a more subdued pace of 3.2% QoQSAA and 5.6% YoY. However, in real terms household liabilities declined by 4.6% on a QoQSAA basis and 0.4% YoY as consumer price inflation increased faster than the uptake of credit.
• The increase in household assets was driven by household investments in retirement funds and unlisted companies that comprise approximately 70% of household assets. For instance the JSE Alsi was 29.4% higher at the end of Q2 2014 compared to Q2 2013.
• In terms of liabilities, asset-backed credit (mortgages and secured loans) is on an increasing trend, while the growth trend in unsecured loans and credit facilities is drifting lower.
• Household debt servicing costs increased by 9.6% QoQSAA in Q2 2014 following an increase of 17.9% in Q1 2014. However, the decline can be attributed to no increase in interest rates in Q2 2014.
• The outlook for Q3 2014 is less rosy because of the decline in the prices of shares listed at the JSE. This will affect the value of households’ interests in retirement funds negatively.
To see the full report click here.
