1. Issues in the measurement of wealth Anne Harrison

2. Towards official balance sheet estimates for South Africa’s household sector Janine Aron, John Muellbauer and Johan Prinsloo

3. Congratulations! Of interest to both macro and micro Academic - govt official estimates Technical – pragmatic Emerging country study – with lessons for some more advanced countries

4. Outline of paper Why is this interesting? How did we do it? How could the work be improved? Analysis of the results

5. 1990 to 2003 Household consumption relative to GDP up from 56% to 65% Gross saving to GDP down from 24.4% to 16% Gross saving of households down from 6.5% to 3.5%

6. Aim..to draw lessons for emerging market countries from South Africa, not only in terms of how to create balance sheets, but also of how the liquid and illiquid asset composition can alter over time as markets deepen

7. Builds on Earlier work by Aron and Mullbauer Data from quarterly bulletin of SARB Money and banking stats and NA Methodology of UK ONS

8. Non-financial assets Housing – land is one third of value of housing on it Other buildings – land about 14% Other fixed assets - small

9. 197519902003 Housing18.6136.9617.2 Other17.4 82.6181.6 Total36.0219.5798.8

10. Financial assets & liabilites Deposits –funds offshore illegally Pensions Equity Mortgages Consumer credit –Loans – micro finance

11. Pensions Assets of pension funds or liabilities to pensioners? Increase in household wealth or reduction of under-funding? Hgl or defined benefit schemes?

12. Possibly.. increase in household wealth may be overstated decline in wealth to income ratio may be understated

13. Consolidation direct investment in shares indirect via unit trusts (mutuals) or pensions

14. But masks.. household attitude to risk functioning of financial markets would hamper extension to other sectors regrettable for micro finance is there a lesson here for UK?

15. Trends in assets /liabilites Income increases Spending increases faster Additions to wealth are slower What about unearned component? Liabilities increase with financial liberalisation

16. Basic story increase in housing increase in pensions assets at cost of more direct investment

17. Conclusion lack of balance sheet data for households hampers effective assessment of household consumption behaviour and how country’s national wealth is managed

18. What else? Pensions and housing dominate wealth Could these two only be analysed by quintile?

19. Housing wealth in Finland Sami Niemaläinen Taru Sandström Markku Säylä Veli-Matti Törmälehto

20. Applause Openly examines discrepancies between micro and macro data Shows many of these are due to conceptual differences Examines how to reconcile these

21. Outline of paper Why is this interesting? How did we do it? How could it be improved?

22. Three sources ”National accounts” Financial accounts Household wealth survey

23. National accounts All dwellings Not land underneath Cumulates from past data Sales of existing houses not tracked Repairs and maintenance

24. Nice quote The needs of statistics are not ranked top in the priority lists of municipal authorities…

25. Financial accounts Includes buildings and land Floor area times market price May exclude garages etc. Difficult to identify owners

26. Household wealth survey Does not include institutional households Deceased persons (NPISH) Self-valuation

27. All houses available All buildings owned by households Houses owned and occupied by households

28. What do we want? NA - estimates of rent on dwellings - estimates of income from housing - estimates of depreciation FA - estimates of wealth HSW – estimates of household wealth

29. What do we have? NAFAHWS Dwellingsxxx Free-time housesxx Landxx Free-time housesx

30. Results Despite all reservations on comparisons, can make reasonable assesment (figure 6, page 28) NA figures look rather low HWS highest (optimism on house prices?) FA not far short of HWS

31. Recommendations Define household wealth Reconcile NA and FA (and HWS)

32. What about.. Free-time (holiday) houses? Houses owned abroad? Houses owned by non-residents? (South Africa also)

33. Why do we buy houses? Because they are a ”good investment” May buy larger than really need May buy to let

34. Questions Do houses prices vary or only locations, ie price of underlying land? Do houses meet needs only or represent deliberate investment decisions? Life length and maintenance

35. Housing Fertile field for continuing exploration on both micro and macro side Financial aspects should not be overlooked Houses may be used as pension equity Wealth aspects as important as flows