GROSS WEALTH AND NET WORTH OF THE HOUSEHOLD SECTOR

The macrostatistical data show households share in the various forms of wealth. Two basic categories are distinguished: the stock of financial and non-financial wealth, i.e. gross wealth,⁵ and net worth, which can be derived by deducting liabilities.

In the national accounts, households’ balance sheet includes the stock of homes and other buildings (garage, workshop, storage space, holiday home, other property), and the value of the tools (machines, equipment) necessary for the productive activities of households as well as the value of the tangible assets (livestock, plantations) related to agricultural activities. Currently, the official Hungarian statistics cover the stock of produced non-financial assets (fixed assets, inventories), without the stock of non-produced assets (land, natural resources). This means that for the time being, the balance sheet does not include households’ land ownership or the value of the land or plot connected to the property, therefore, for the purposes of this publication, the macrostatistical data were supplemented with the estimated values for these. According to the statistical methodology requirements, households’ wealth does not include the stock of tangible assets used independently from production, therefore the acquisition of these durable goods (e.g. vehicles, furniture, durable consumer goods) is recorded in the national accounts as consumption rather than accumulation. In a similar fashion, wealth does not include inventories for consumption (e.g. food, clothing, tools).

5 In the present publication, (gross) wealth means total assets at market value. In gross wealth, the market value of non-financial assets is estimated with the net statistical value, i.e. the depreciated asset value. In the case of financial assets, there is no such differentiation in asset value. Therefore gross wealth does not mean that some items are recorded at their gross value, but that they are not reduced or netted with the value of liabilities. See the notes on methodology as well.

Chart 2-2-4

Changes in the components of use of total disposable income of households, as a percentage of GDP

0 10 20 30 40 50 60 70

Consumption Investment Financial savings

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Percentage of GDP

Source: Authors’ calculations based on HCSO data (national accounts).

Information on the accumulation of financial assets can be gained from financial accounts. The main categories included in the statistics are the following: currency (cash holdings), deposits, debt securities, credit or loans granted, shares and other equity in companies, investment fund shares/units and insurance technical reserves.

The largest item among liabilities is loans, but the category also includes unpaid invoices and other debt from tax liabilities and contributions.

Table 2-3-1

Balance sheet of the households sector, stocks and components of changes in stocks, billion HUF

Stocks 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Non-financial assets of

households 32,495 35,162 37,719 40,502 42,059 42,749 43,646 45,249 46,159 47,264 48,794 Fixed assets (net) 25,826 28,011 30,148 32,312 33,494 34,104 34,733 35,381 35,875 36,393 37,028

Inventories 160 158 153 148 142 141 143 143 141 146 146

Land 6,509 6,993 7,418 8,042 8,423 8,504 8,770 9,725 10,143 10,725 11,620

Financial assets of

households 20,528 23,308 25,656 26,539 28,615 30,332 31,614 32,818 34,787 37,991 41,219 Currency and deposits 7,253 7,854 8,537 9,683 10,139 10,017 10,730 10,716 10,201 10,653 11,429 Debt securities 1,203 1,313 1,174 1,442 1,380 1,591 1,726 2,134 2,752 3,052 3,756 Equity and investment

fund shares 7,109 8,280 9,338 9,106 9,700 10,615 11,095 11,694 13,338 15,237 16,729 Insurance technical

reserves 3,182 3,919 4,624 4,348 5,381 6,002 3,035 3,088 3,194 3,455 3,569

Other accounts receivable (loans, financial derivatives, other)

1,781 1,942 1,984 1,961 2,015 2,107 5,028 5,184 5,302 5,593 5,736

Gross worth of

households 53,023 58,470 63,375 67,041 70,674 73,080 75,260 78,066 80,946 85,254 90,013

Liabilities 6,269 7,435 8,832 11,080 11,143 11,934 11,792 10,364 9,770 9,672 8,703

Net worth of households 46,754 51,036 54,543 55,961 59,531 61,146 63,468 67,702 71,176 75,582 81,310 Transactions

Non-financial assets 1,218 1,323 1,249 1,361 1,297 1,060 832 782 817 847 848

Financial assets 1,953 2,078 1,915 1,678 881 861 525 566 1,027 1,489 1,495

Liabilities 1,104 1,310 1,508 1,397 –25 –322 –947 –882 –430 –275 –1,128

Changes in net worth

due to transactions 2,066 2,091 1,656 1,642 2,203 2,244 2,304 2,230 2,274 2,611 3,470 Revaluation

Non-financial assets 495 1,345 1,308 1,422 260 –371 65 821 93 258 683

Financial assets 870 702 433 –792 1,195 877 749 675 943 1,681 1,809

Liabilities 42 –135 –81 894 161 1,226 917 –394 8 339 359

Revaluation of net worth 1,323 2,181 1,821 –265 1,294 –719 –103 1,890 1,028 1,600 2,133 Source: HCSO (national accounts), MNB (financial accounts). The stock of land and all real assets for 2015 include the authors’ estimates.

According to the supplemented national accounts data, the gross wealth of households at the end of 2014 was HUF 85 trillion, the majority of which, HUF 47 trillion, comprised the stock of real assets, and the wealth held in financial assets was somewhat less, HUF 38 trillion. Households’ debt was close to HUF 10 trillion, thus the net worth of the sector was HUF 76 trillion, 233% of GDP at the end of 2014.

The stock of real assets in the gross wealth of households exceeded that of financial assets all throughout the period. However, in the past 20 years, stocks in financial wealth have increased more, almost doubling from 64 to 117 per cent of GDP. Meanwhile, real wealth relative to GDP fluctuated in a narrower band, dropping from 162 to 146 per cent of GDP during the period. At the end of 2014, the value of the two forms of wealth came close to each other, and the value of both real assets and financial assets exceeded that of annual GDP. The increased momentum in household lending in the 2000s resulted in a decline in households’ net worth relative to GDP, while the decrease in debt characteristic of the recent years entailed a rise in net worth. Households’

net worth in the period under review was around 210–230 per cent of GDP.

The stock of financial assets relative to GDP exhibits a steady upward trend, except for 2008, when households’

savings shrank due to the financial crisis. Within this, stock of currency and deposits relative to GDP have been relatively stable at approximately 33 per cent. Ultimately, the expansion of financial wealth was not attributable to holding these instruments that are considered traditional forms of investment but the emergence of new forms of investment. This is because with the development of the financial intermediary system and the increasingly prominent role of the central government, investment opportunities expanded continuously, and bonds, investment fund shares/units and life insurance and pension fund savings gained prominence. The combined value of these investments rose from 7 to 33 per cent of GDP in the period under review. Currently, the greatest part in households’ increasing financial wealth is represented by share and equity wealth, which exceeded households’ stock of accumulated cash and deposits at the end of 2014.

Chart 2-3-1

Gross and net worth of households, as a percentage of GDP

-50

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Percentage of GDP Percentage of GDP

Real assets Financial assets

Liabilities* Net worth (right axis)

* Liabilities relative to GDP are represented with a negative sign on the chart, in order to show their effect on net worth Source: HCSO (national accounts), MNB (financial accounts). Real asset data include the authors’ estimates.