Average household is worth €674,000

A REPORT by the National Irish Bank published yesterday reveals that the average Irish household is now worth €674,000.

Even allowing for the value of the main family home — which is the prime source of wealth for the vast majority of people — Irish households still enjoy an average fortune of €352,000.

However, the warm glow of pleasure that should accompany such statistics is likely to escape most readers who probably feel more acquainted with another of the report’s findings — namely that average household debt now stands at €127,000.

One of the report’s authors, NIB chief economist, Dr Ronnie O’Toole, points out that Ireland’s debt levels have been the focus of numerous reports, while the subject of our actual wealth has been largely overlooked.

While people tend to concentrate on the size of their outstanding mortgages and monies borrowed on credit cards, they often fail to give equal recognition to the fact that most homeowners have seen the value of their property soar over the past decade, as well as the value of their assets accumulate year by year.

“The figures can look dramatic but we believe they are reliable given the total value of the Irish housing stock combined with estimates on monies invested in the Irish stock market, either through shares or various funds and other assets,” said Dr O’Toole.

Overall, the NIB snapshot of Irish wealth show that “Ireland’s balance sheet remains strong”. However, Dr O’Toole admitted it was difficult to make any reliable estimate on what proportion of all households actually enjoy the average wealth level of €674,000.

Presumably, the wealth of the estimated 30,000 millionaires living in Ireland, including the super-rich whose fortunes extend to figures in billions, can distort the overall picture.

In reality, the personal wealth levels of thousands of Irish households whose members live on the average industrial wage (€36,800) are likely to be below the average of €352,000, excluding family homes.

But as the NIB points out, the vast majority of Irish wealth is locked up in property and other illiquid types of assets like pension and investment funds.

Such wealth accounts for almost 95% of all our assets but sadly most of it can’t be touched.

Half of all our wealth, according to the NIB, relates to the value of the family home. Property is identified as the driving force of wealth creation in Ireland, as it has outperformed stock market shares since 1998.

Confirmation of Ireland’s increasing wealth can also be judged by the massive increase in sales of private jets, luxury yachts, foreign properties, long-haul holidays and high-performance cars.

“The Pope’s Children”, as the economist, David McWilliams has christened high-spending Irish consumers, have used the locked-up value of property to raise money to fulfil their dreams of a wealthier lifestyle, many happily going into debt to attain expensive status symbols.

However, not all such spending sprees are as wild or reckless as can often appear, as the NIB report identifies the paradox that discount retailers like Lidl and Aldi are expanding rapidly in Ireland at the same time.

“Many consumers who are the most demanding in terms of acquiring the most luxurious goods and services are the same ones that are shopping in their local Lidl. It seems that many Irish consumers can happily reconcile their conspicuous consumption with seeking the best value in other areas of their lives,” said Dr O’Toole.

Perhaps, Irish consumers are more canny than they are generally given credit for.

The Wealth of Modern Ireland — Main Findings

* Household wealth to exceed €1 trillion (€1,000 billion) in 2008.

* Irish households have a wealth holding of €674,00 each on average (€352,000 excluding principal residence).

* More luxury private jets have been bought in Ireland than any other European country in recent years.

* Irish motorists own more Mercedes cars than Germans on a per capita basis.

* Every €10,000 invested in property in 1998 is worth €20,000-€35,000 by 2007.

* €10,000 invested in Irish shares in 1990 is worth €50,000 today.

* Main private residences account for almost 50% of all personal wealth.

* Investment properties account for 20% of all wealth.

* One quarter of wealth is held in stocks and shares (including pension and investment funds).

* Ireland’s national debt to GDP ratio is just 11% compared to the eurozone average of 70%.

Sure signs of Irish prosperity

* Numbers of holidays by Irish people to Middle East and Asia growing by 17% per annum since 2000.

* 60% of farms bought in 2006 were by cash-rich businesspeople as a lifestyle choice.

* High performance cars like Jaguar, Porsche, Mercedes and BMW have all increased their market share in recent yeas at the expense of smaller vehicles.

* An estimated 50 Irish people own private jets compared to six in 2000.

* The number of helicopters in Ireland has grown by 150% since 2000 Ireland has a higher yacht ownership rate than Britain or the Netherlands with €50m sales of new boats each year.

* Income from overseas investments rose from €35 billion in 2004 to €70 billion last year.