The net wealth of Irish households has surpassed €1 trillion for the first time, which is equivalent 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 primarily a function of higher house prices. Rising savings rates during the pandemic also played a role.
The figures show that the net wealth of households in the Republic increased by 19.6 billion euros in the first quarter of 2022 to reach a record of just over 1 trillion euros. The increase was driven by real estate assets, which also reached a series high of €649 billion, up from their previous high of €630 billion in the previous quarter.
“Positive real estate asset appreciations” represent the main driver of increases in net wealth in recent quarters, the regulator said, noting that the year-on-year increase in house values amounted to 95 billion euros, representing the highest annual revaluations recorded.
Rising deposits and upward revaluations of other financial assets, which together add up to 32 billion euros year-on-year, have also been important sources of net wealth growth, it said.
The central bank warned that the increase in aggregate household wealth does not capture wealth distribution effects across the sector, while noting that “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,” he said.
Household net worth is calculated by adding the total value of homes and financial assets, such as cash savings, stocks, pensions, and possessions, such as cars and antiques, and subtracting any debt 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.
Figures from the Central Bank show that gross household savings fell for the second consecutive quarter during the first three months of the year, falling by €900 million to €7.2 billion in the quarter. However, this is still high compared to pre-pandemic levels.
The regulator said the decline in savings was due in part to a decline in total household disposable income during the quarter and an increase in consumer spending. “The latter is due to inflation rather than households consuming more goods and services, and final consumption after adjusting for inflation declined during the quarter,” he said.
Households are expected to use up savings accumulated during the pandemic to pay higher energy and food bills.
The figures also show that public debt fell by €10 billion in the first quarter to €239 billion. The drop 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 fell 1 percentage point to 197 percent in the first quarter, the central bank said.
However, in value terms, there was a large increase in private sector debt to €861 billion, driven by a €25 billion increase in non-financial corporate debt.