South African Household Wealth Index Q2 2015

Executive summary and highlights

• South African households’ net wealth decreased in real terms (2010 prices) in the second quarter of 2015 (Q2 2015).

• Momentum/Unisa estimates that real household net wealth declined by 3.9% compared to Q1 2015 (Quarter over quarter seasonally adjusted and annualised - QoQSAA). This means that real household net wealth declined by R64.5 billion to R6 424 billion (R6.424 trillion) over the quarter.

• This decline was large enough to wipe out all wealth gains since a year ago (Q2 2014). In Q2 2015 real household net wealth was R9 billion less than a year ago.

• The consequence of this decline is that households will have to review their future lifestyle expectations, as well as adjust their other saving, retirement and investment goals.

• The main cause of the deterioration in the real value of household net wealth can be ascribed to a relatively strong decline in the purchasing power of the value (real value) of household assets.

• Momentum/Unisa estimates that the real value of household assets declined by R86.4 billion, or 4.3% on a QoQSAA basis. Similarly, the real value of household liabilities declined by R21.9 billion or 6.0% compared to the real value of liabilities in Q1 2015.

• The real value of household assets was adversely affected by a decline in the real value of financial assets invested in shares listed at the JSE, stagnation in households’ contributions to contractual savings products (to annuities, official- and private retirement funds and pension- and group life business), and a slowdown in house price growth.

• The decline in the real value of household liabilities can be attributed to the un-affordability of debt as reflected by among others, a further increase in the average weighted interest rate on loans during Q2 2015. The average weighted interest rate increased to an estimated 12.1% in Q2 2015 from 11.9% in Q1 2015 and is now at the highest level since Q1 2015.

• At 21.9% of amended disposable income, the average instalment (to repay debt) was 6% higher than a year ago (Q2 2014).

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