South African household wealth fell by R237 billion in the third quarter of 2019 due to the effects on their assets and savings of the US/China trade war, fears of recession in the US, international terrorism attacks, Eskom,state capture and the feeble local economy.

The Momentum/Unisa Household Net Wealth Index showed yesterday  (wed) that households’ real wealth declined by R237bn in the third quarter to R6.97 trillion, when compared to the second quarter, and it was also R133.7bn less than in the third quarter of 2018.

International events had a profoundly negative impact on the after-inflation value of their pension funds and investments, while domestic events played a major part in preventing strong growth in the real value of their property values, Momentum said in a statement.

The value of households’ outstanding debt fell in the third quarter, but it was higher compared to a year ago.

However, preliminary estimates pointed to a recovery in household net wealth in the fourth quarter – so much so that households would end 2019 richer when compared to 2018.  

Expressed as a percentage of gross household income, the ratio of household net wealth fell from 276 percent in the second quarter of 2019, to 266.7 percent in the third quarter.

The real value of household assets decreased by R240.9bn from the second quarter to R8 381.9bn in the third quarter, despite households increasing their savings to pension funds and retirement annuities.  

The decrease was caused by declines in the real values of both financial and residential assets. Several international events drove the decline in the real value of financial assets.

The JSE All Share Index lost 6.8 percent in real terms over the third quarter and the real All Bond Index 0.3 percent.

Contributions to pension and group life schemes, retirement annuities and official and private administered pension funds increased by 5.7 percent in the third quarter over the second quarter.

Real house prices remained unchanged, while new investments in residential property declined at an annual rate of 4.6 percent in the third quarter.

This, coupled with depreciation,  contributed to a decline in household property values.

Domestic factors were the main cause of this decline including power utilities Eskom’s inability to generate enough electricity, and the economy shrinking by 3.1 percent in the third quarter, compared to the second quarter.

The real value of households’ outstanding liabilities decreased by R3.9bn to R1 42 trillion from the end of the second to the end of the third quarter. However, it was R20.6bn higher than the year before.

Households normally revert to personal loans as the main source of unsecured credit during the third quarter of a year and the pattern had continued in 2019.