Households lose capital, but gain income in 2008

09/04/2009 15:00

Households suffer considerable loss of capital
Higher real disposable income households
Mortgage debt gradually growing
Declining profits private sector

As a result of the global finacial crisis, the value of shares and bonds owned by Dutch households has decreased by 66 billion euro last year. According to provisional figures released by Statistics Netherlands, one quarter of the value of shares and one tenth of the total value of bonds has evaporated. Assets of pension funds and insurance companies – indirectly owned by households – fell by 149 billion euro (16 percent).

In 2008, households had more financial headroom than in 2007. Their real disposable income rose by 1.6 percent, chiefly as a result of higher wages and more jobs. With more than 3 percent profits, the contribution of self-employed to household income growth was relatively small. In the second half of last year, profits generated by self-employed had declined relative to the same period in 2007. With 1.6 percent, the increase in the real disposable income of households was distinctly down on the increase by 4.5 percent in 2006 and 3.7 percent in 2007. The consumption growth by 1.7 percent in 2008 is in the same order of magnitude as the income increase.

Last year, the overall household debt continued to grow; with 40 billion euro to 721 billion euro. Residential mortgages almost entirely accounted for the debt increase. The overall mortgage debt rose by 6 percent from 588 to 625 billion euro. The increase is less substantial than in the three preceding years.

In the private sector profits shrank in 2008. Net profits in the non-financial sector were under pressure as the results of foreign participations showed a downward trend. Although throughout the year, the non-financial sector has borrowed approximately the same amount as in 2007, the situation changed in mid-2007. In the second half of 2008, non-financial companies on balance paid off nearly 15 billion euro. The financial sector made higher profits from their usual activities. This was mainly caused by higher interest margins, because the interest rate of borrowed capital was lower. On the other hand, financial institutions faced a (gross) loss of value to the amount of 278 billion euro in financial assets on their balance, predominantly caused by the negative mood on the stock market and depreciation of participations.