Household Wealth on the Pre-Recession Levels

Banking halt in loan giving and debt reduction in Spanish households resulted in the net financial wealth rise to levels from 2006, before the real estate bubble had burst.

As the data published by the Bank of Spain reveals, net financial assets in the household housing reached €1.044 billion in 2013, that is by 25.5% more than in the previous year. In 2006 the amount showed €1.006 billion.

A great part of the 2013 amount corresponded to family cash and deposits (€882.115 million), while in case of shares and other type of holding it reached €644.479 million. The money invested in desposits and deposited on accounts rose by 2.6%, whereas the investment in shares went up by 11.8%, in comparison to 2012 figures.

The news is two-faced as the positive side is the intensive deleveraging process taking place naturally when the society drawns in debt, especially related to the real estate. For example, the long-term loans diminished by €46 billion in comparison with the year 2012, whilst the short-term credits fell by 7.4% to €28.5 billion.

The groomy face of the data reflects in shortage in new loan applications, let alone the reluctance of the banks to grant credits.

Different opinion is being expressed by Rafael Pampillón, the economics professor at the IE Business School, who claims that the data neither derives from the deleveraging nor the loan obtaining difficulties. “Today´s wealthiness rate is the result of mortgage amortization as most of Spaniards continued to pay their houses also during the recession. On the other hand, people keep calm with the saved money without fear of losing the purchasing power.” He also stresses the decline in interest rates as the third main factor which has produced the data.

Moreover, last year the Spanish Stock Exchange Market grew by 25%. That indicates an increase in family wealthiness as they decide to invest in more profitable shares.

Original article: Expansión (by Y. G.)
Translation: AURA REE

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Translation/Summary: aura