Wealth of Irish households rises above €1tn for first time

The net wealth of Irish households has risen above €1 trillion for the first time in what equates to almost €200,000 for every man, woman and child in the State.

The rise in wealth, detailed in the Central Bank’s latest quarterly financial accounts, comes despite the crippling effects of inflation and is, in the main, a function of higher house prices. Increased savings rates during the pandemic also played a role.

The figures show net household wealth in the Republic rose by €19.6 billion in the first quarter of 2022 to reach a record high of just over €1 trillion. The increase was driven by housing assets, which also reached a series high of €649 billion, above its previous peak of €630 billion recorded in the previous quarter.

“Positive revaluations in housing assets” represent the dominant driver of increases in net wealth in recent quarters, the regulator said, noting the year-on-year jump in housing values amounted to €95 billion, representing the highest annual revaluations on record.

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Increasing deposits and upward revaluations of other financial assets, collectively totalling €32 billion year-on-year, have also been important sources of growth in net wealth, it said.

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The Central Bank cautioned that the rise in aggregate household wealth does not capture the wealth-distribution effects across the sector, while noting “the underlying experiences of individual households may vary”.

“In particular, the Covid-19 pandemic is likely to have had varying effects on the wealth of different household groups,” it said.

Household net worth is calculated by adding the total value of the housing stock and financial assets — such as cash savings, shares, pensions and possessions such as cars and antiques — and subtracting debt owed or liabilities.

It is considered a crude measure of prosperity as it hides the distribution of household assets and liabilities across income groups and age categories.

The Central Bank figures show gross household savings declined for the second consecutive quarter during the first three months of the year, falling by €900 million to stand at €7.2 billion for the quarter. However, this is still high when compared to pre-pandemic levels.

The regulator said the decline in savings was driven partly by a decline in the total disposable income of households over the quarter and an increase in consumer spending. “The latter due to inflation rather than households consuming more goods and services, with final consumption after adjusting for inflation decreasing over the quarter,” it said.

Households are expected to run down savings built up during the pandemic to pay for higher energy and food bills.

The figures also show Government debt declined by €10 billion in the first quarter to stand at €239 billion. The fall was driven by a reduction in long-term and short-term debt. Private sector debt as a proportion of national income or gross domestic product declined by 1 percentage point to stand at 197 per cent in the first quarter, the Central Bank said.

However, in terms of value, there was a large increase in private sector debt, to stand at €861 billion, which was driven by a €25 billion rise in non-financial corporations debt.