The worth of South African households have increased substantially over the last few months, which is a good indicator that homeowners are taking charge of their finances.
Despite the economic climate in South Africa being under pressure and to a certain extent unpredictable, according to the Momentum-Unisa SA Household Wealth Index the worth of households grew by 3.9% between the fourth quarter of 2015 and first quarter of 2016, with an increase of R67.8-billion.
The reason for the increase in household wealth, according to the report, is due to fewer liabilities, which means people are paying their debts a lot faster.
What is interesting to note is that the index showed that 25.6% of gross income is now going to paying off debt which is up from 23.1% in 2015. Household debt has also reduced due to the sustained low interest rates that we have seen. We certainly hope that the South African Reserve Bank will keep interest rates at 7% this week when they meet.
As consumers consolidate their debt and pay it off faster they become more financially independent which opens up opportunities for them to acquire debt that acts as an investment, like property.
It is very good news that South African's are acting more responsibly and cutting down on excessive consumer spending. With stricter lending criteria enforced by banks consumers need to maintain a good credit record for private and commercial investment chances.
In an emerging economy it is good to protect yourself against external economic forces so you are shielded from drastic market fluctuations.
Statement by Richard Gray, Harcourts CEO.