The value of South African household wealth decreased by about R1.528 trillion since the first quarter of the year to R15.5 trillion, according to the Momentum/Unisa South African Household Wealth Index for the third quarter of 2022. Households lost about R253 billion in the third quarter following the decline of R1.275 trillion in the second quarter.
Johann van Tonder, economist and researcher: Financial Wellness at Momentum, said this decline also means the value of household wealth was R9.3bn, or 0.1%, lower compared to the third quarter of 2021, meaning the initial gains in the next six months to the first quarter of 2022 were more than erased in the six-month to the third quarter of this year.
“If households want to climb out of this rut and gain more wealth, their income must increase at least by more than the consumer price inflation (CPI) rate,” Van Tonder said.
When expressed in constant prices – to establish whether household wealth increased by more or less than the CPI rate – the index shows it was 6.2% lower than a year ago. Put differently, households were essentially an estimated R977.5bn poorer compared to the third quarter of 2021 – and at similar levels as in the first quarter of 2015.
“The decline in the value of household wealth was caused by a decrease in the value of household assets, specifically financial assets. Several factors contributed to the declining value of household assets over the past six months. The most prominent of these factors are fast and large increases in interest rates all over the world in an attempt to combat high CPI rates, and an expectation of a world economic recession,” Van Tonder said.
Consequently, the index revealed that share prices declined and bond yields increased, negatively affecting the value of households’ retirement funds and investments.
According to the index, the value of household retirement funds and other interests in long-term insurance declined by about R630.3bn since the first quarter of this year, while investments decreased by R1.061 trillion. Combined, these two asset categories declined by R1.691 trillion. This decline was marginally offset by an increase of R250.1bn in the value of other assets, such as residential buildings, durable goods and deposits, leading to the value of total assets decreasing by an estimated R1.441 trillion.
In addition, the index reveals that outstanding household liabilities increased by about R86.9bn in the six months to the third quarter, with equal increases in outstanding mortgage bonds and other debt.
“The combined effect of increasing outstanding liabilities and declining asset values contributed to the decline in household wealth. However, at this stage, the outlook is for household wealth to have reached a bottom, and for a revival in household assets to drive a recovery in household wealth,” Van Tonder said.
