Last week the Reserve Bank provided an update on the South African household sector’s balance sheet, as at the end of 2010. Encouragingly, the household sector’s net wealth rose by an reasonably robust R509 billion in 2010 (+10.6%y/y) to end the year at R5.313 trillion. This is a record level, despite the recent recession and the difficult global and local economic conditions.
The value of SA household assets amounted to R6 570 billion at the end of 2010 (up 9.7%y/y). Most of this is in the form of financial assets (R4 605 billion) including, for example, bank deposits, pensions funds, and unit trusts. The value of residential buildings amounted to R1 644 billion (up 3.4%y/y).
In contrast, SA household debt totaled R1 257 billion at the end of 2010 (up 6.3%y/y). Most of the debt is in the form of mortgages (R781 billion). The remaining debt is represented by items such as car finance, overdrafts, personal loans, student loans, credit cards etc.
Correspondingly, as mentioned above, household net wealth (assets less liabilities) equated to R5 313 billion at the end of 2010. If durable consumer goods are included, household wealth rises to R5 736 billion. Interestingly, the net worth of residential property is a healthy R863 billion (up 3.0%y/y). Stated differently, at the end of 2010, the value of residential property was equivalent to 210% of the amount owed on residential property.
Using the international convention of comparing net wealth to disposable income, SA’s net wealth is equivalent to 312% of disposable income. This is slightly above the recent low of 293% in Q1 2009 and above SA’s long-term average of 307%. Using the US as an unfair comparison, their net wealth is currently equivalent to 496% of disposable income (although it has previously spiked to over 600%, when they created either the Hi-Tech bubble or the more recent residential property bubble).
Overall, it is encouraging to see that SA household wealth continued to rise in 2010, and has increased by just over R3.0 trillion in the past seven years (average annual growth rate of 12.9%). This is despite the recent global and local recession. Importantly, this is a broad but positive relationship between increases in household wealth and consumer activity and confidence.
Unfortunately, these statistics tell us nothing about how unevenly wealth is distributed in SA. SA still has one of the world’s worst levels of income and wealth inequality.
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