Globally, last year was bitter in terms of savings, with households losing €6.6 trillion.
German financial company Allianz is the latest Global Wealth Report Its report stated that the financial wealth of households globally decreased by 2.7% compared to the previous year, which is the largest decline since the financial crisis in 2008. According to the report, a total of 6.6 trillion euros in assets were lost in 2022.
This decline is primarily due to the overall bleak and uncertain outlook prevailing in the markets, as financial instruments have declined everywhere.
The most significant decline was in North America (-6.2%), followed by Western Europe (-4.8%). But in Asia, with the exception of Japan, growth rates have remained relatively strong. Financial assets in China are still growing strongly at 6.9%, but compared to an average growth of about 16% over the past 20 years, this is also quite disappointing.
The world’s total financial assets amount to 233 trillion euros, nearly ten times the GDP of the United States. According to the report, 85% of this amount is owned by the richest 10% of the population, or about 560 million people around the world.
Which investments have suffered the most?
While securities such as stocks and bonds lost 7.3% overall, and investments related to insurance and pensions lost 4.6%, bank deposits rose 6%.
Inflation consumed nearly two-thirds of nominal wealth growth. This can best be seen when comparing savings to pre-Covid levels.
At the end of last year, global household financial wealth was still about 19% above the pre-Covid-19 level in nominal terms. But if we adjust this for inflation, it turns out that nearly two-thirds of (nominal) growth fell victim to rising prices, meaning real growth fell to 6.6% in three years.
While most regions achieved at least some growth in real wealth, Western Europe saw no nominal gains at all and, in fact, real wealth fell by -2.6% in 2019.
Brighter prospects are on the horizon
After last year’s decline, global financial wealth is expected to start growing again this year, primarily due to positive development in stock markets. According to Allianz forecasts, growth of 6% is expected in 2023, and about 4-5% in the next three years.
Real estate for private families
What would a ranking of an individual’s net financial assets look like if property values were also taken into account?
The report cites data for North America, Japan, Australia, and Western and Eastern Europe. In these regions, the total real estate assets (value of land and housing) of private households amounted to about €140 billion at the end of 2022. This is 19% less than the value of total financial assets, which is surprising because real estate assets – most of which are owner-occupied dwellings – are considered… Generally, the largest assets in household balance sheets. This is also true for Australia and Eastern and Western Europe, where the value of real estate is on average 49%, 23% and 27% higher than financial assets, but not for Japan and North America, where the proportion of financial assets is almost twice as high as that of real estate.
On the other hand, property owners can still enjoy a significant increase in value in 2022, with the overall increase reaching +8.8%. Among the countries included in the study, only one can boast a double-digit growth rate in the long term, namely Hungary, which achieved +11.9%.
Based on Allianz’s forecasts, the collapse in demand for real estate will be reflected in a general decline in housing prices this year.
