The Momentum / UNISA Household Wealth Index 3rd Quarter 2014

The value of South African households’ wealth declined by an estimated R88.5 billion in the third quarter (Q3) of 2014.

According to the Momentum/UNISA South African Household Net Wealth Index, the value of households’ net wealth declined by 4.4% on a nominal seasonally adjusted and annualised basis compared to Q2 2014. However, at an estimated R7 844 billion (R7.844 trillion) the value of household net wealth was still 10.5% higher than a year before (Q3 2013).

The decline in household net wealth was caused by an increase in their liabilities/debt, as well as a reduction in the value of household assets. An estimated 33.1% of the decrease in household net wealth can be attributed to the increase in households’ liabilities and the remaining 66.9% to the reduction in the value of household assets.

Momentum/Unisa estimates that in Q3 2014 household liabilities increased by R30 billion to R1765 billion. In contrast, the value of household assets declined by R58.5 billion to R9 609 billion in Q3 2014.

The decline in the value of household assets was primarily caused by a reduction in the value of household financial assets – especially assets invested in companies listed on the JSE. The JSE All Share Index declined from 50 945 points at the end of Q2 2014 to 49 315 at the end of Q3 2014. This represents an annualised quarterly decline of 12.2%.

Lower international economic growth, international uncertainties regarding interest rate changes in the United States of America and declining commodity prices affected international stock exchanges negatively during Q3 2014 – and this spilled over to the JSE. In addition, labour strikes in the manufacturing sector also contributed to lower domestic share prices. This meant that when workers went on strike for higher wages, they lost money in terms of their wealth.

Highlights

• According to the Momentum/Unisa South African Household Net Wealth Index, the value of South Africans’ net wealth declined by 4.4%, or R88.5 billion to R7 844 billion in Q3 2014 compared to Q2 2014 (quarter-over-quarter seasonally adjusted and annualised – QoQSAA).

• Expressed in 2010prices (real terms), the pace of decline was more substantial at 8.8%.

• The decline of R88.5 billion can be ascribed to two developments:
o An increase of R30 billion in the value of household liabilities.
o A decline of R58.5 billion in the value of household assets.

• The decline in the value of household assets was primarily driven by waning listed share prices. With the JSE All Share Index declining from 50 945 points at the end of Q2 2014 to 49 345 points at the end of Q3 2014 it contributed to the decline in the value of households’ financial assets – the bulk of household assets is invested in listed shares at the JSE.

o Listed share prices were negatively affected by international uncertainties such as whether and when interest rates will increase in the United Statesof America, declining commodity prices, prospects of lower world economic growth for 2014, as well as labour strikes in the South African manufacturing sector.
o This contributed to a 2.4% decline in the value of household assets (to R9609 billion in current prices) compared to Q2 2014.

• In contrast, the value of household liabilities (in current prices) increased at an estimated QoQSAA-rate of 7.1% in Q3 2014.

• Household liabilities are estimated to have increased (by R30 billion) to R1 765 billion (current prices) in Q3 2014.

• Although the value of household net wealth declined in Q3 2014 compared to Q2 2014, it was still 10.5% higher compared to Q3 2013.

• Household debt service costs increased further in Q3 2014 to an estimated R205.7 billion.This represents a QoQSAA increase of 11.6%and was brought about by an increase of 25 basis points in the repo rate and a further increase in households’ debt load.

To read the full Household Wealth Index click here.