You are Here > My Money > Surprising increase in household net wealth

Surprising increase in household net wealth

Feb 26, 2021

South African households’ real net wealth increased by just over R1 trillion since the first quarter of 2020, according to the latest Momentum-Unisa Household Wealth report.

Surprising increase in household net wealthBetween the start of the second quarter of 2020 (Q2 2020) and the end of the year (Q4 2020), the real net wealth (assets minus liabilities) of South African households increased by an estimated R1 009.1 billion (R1.009 trillion)

This is the key finding of the latest Momentum-Unisa Household Wealth report.

The increase in real net wealth happened despite COVID-19, the lockdown, job losses and an economic contraction.

This recovery follows an estimated decline of R772.8 billion during Q1 2020 that resulted from the introduction of lockdowns in many countries (including South Africa) to limit the spread of COVID-19.

Momentum-Unisa estimates that the real value (expressed in 2010 prices) of household net wealth increased to R7 797.4 billion by the end of Q4 2020. This is R236.3 billion higher than a year before.

The increase in household net wealth was even more spectacular when measured in nominal terms (current prices). It is estimated that household net wealth increased by R1 958.8 billion (almost R2 trillion) from the end of Q1 2020 to the end of Q4 2020.

The huge increase in household net wealth can mainly be ascribed to strong growth in the value of financial assets such as shares and bonds. Households’ pension funds and financial investments benefitted immensely from the increases in these financial instruments.

Estimated real value and change in household assets (2010 prices)

Wealthiest 2% own almost 50% of net wealth

A distributional analysis of the ownership of household net wealth revealed that the wealthiest 2% of households owned almost 50% of household net wealth (just before the start of the pandemic). In contrast, the bottom 16% had negative net wealth values (their outstanding debts exceeded the value of their assets).

These numbers should, however, be interpreted with caution. For instance, the wealthiest 2% are not necessarily the top 2% income earners. Many middle-income earning households formed part of the wealthiest 2% of households as they, among others, saved, invested, and insured in the right way, whilst not borrowing beyond their affordability thresholds.

Contrastingly, some high-income earners had a negative net wealth position as they used their income sub-optimally from a wealth creation point of view.

The lockdown also exposed the dangers of using household balance sheet ratios as measurements of households’ indebtedness and state of wealth.

Ratios such as debt to disposable income and net wealth to disposable income increased sharply, when in fact, the actual monetary situation revealed that households had less debt and their wealth decreased.

It is therefore necessary to analyse both the ratios and the balance sheet values to make sense of households’ indebtedness and net wealth.

A more detailed analysis can be found here.

About the Index

As part of Momentum’s Science of Success campaign, the Household Wealth Index is produced in partnership with Unisa. It aims to provide South Africans with information to assist with their journey to financial success. Momentum-Unisa used data from previous Momentum-Unisa Household Financial Wellness Surveys of more than 20 000 identified households to estimate and distribute households’ assets, liabilities and net wealth.

This post was based on a press release issued on behalf of Momentum-Unisa.

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Maya Fisher-French author of Money Questions Answered

Previous Articles

Inside a cryptocurrency scam

Social media networks are being used to lure people into a cryptocurrency scam. A sophisticated social media network is being used to con South Africans by claiming to generate huge returns through trading. The network is made up of 300 fake twitter accounts...

Working from home? You can claim from SARS

Elani van der Westhuizen, senior tax technical at TaxTim, explains what you can claim from SARS if you've been working from home. There's some good news for you if you’ve been working from home for the past year. You can claim a tax deduction if you worked from home...

Video: Set goals for money success

The key to achieving our money goals is to use psychology to set us up for success. When it comes to our money goals, behavioural economist Erik Vermeulen says we need to set specific long-term goals, but also have built-in intermediate success measures to make our...

Anger over high-cost investment products

A blame-game is starting with complaints about overpaid financial advisers and expensive product options. Readers have provided numerous examples of high-cost investment products sold by advisers working for large insurance firms. Clients are angry about high fees and...

Finding a more equitable credit model

The Save2Buy model is a hybrid between a lay-by and more traditional credit. In a world where credit has become a way of life, is it possible to find a system that allows someone to purchase an item and have use of it whilst paying it off, but without being fleeced by...

Can you bag a cheap deal on an overseas holiday?

Taking an overseas holiday is still possible but this can come at great risk to travellers’ pockets, finds Angelique Ruzicka. Differing social distancing rules and travel bans imposed by countries and airlines have done much to disrupt the global travel industry,...

Listen: Investigating crypto scams

In this My Money, My Lifestyle podcast we delve into the world of crypto scams which seem to be mushrooming everywhere, despite repeated warnings from our authorities. How do these crypto scams work? How do people get lured into parting with their hard-earned cash?...

Video: Understand your electricity bill

The cost of electricity will increase by 15% in April. That is triple the rate of inflation which means a bigger portion of our budget will go to paying for electricity. It is worth taking the time to understand how your electricity is charged for and to find ways to...

When does it make sense to have a travel allowance?

If you are required to travel for work there are several ways to claim for this expense. You can receive a travel allowance or be provided with a company car. In the case of a travel allowance, the employer would normally pay a set amount, for example R5 000 a month....

FSCA issues crypto health warning

The FSCA wants to warn the public that if something goes wrong with your crypto investment, you are not likely to get your money back and will have no recourse against anyone. The Financial Sector Conduct Authority (FSCA) has noted with concern the increasing volume...

Pin It on Pinterest

Share This