UK "one of the wealthiest countries on the planet & getting wealthier by the day"

HAMISH_MCTAVISH

Estimates from the Office for National Statistics released last week suggest that net household worth increased by £410bn between 2011 and 2012, taking national net worth to an all-time record of £7.6 trillion.

Remember, this is net of liabilities, including now crippling levels of government borrowing, so the idea that the nation as a whole is sinking under a mountain of debt is pretty much a fiction.

These estimates are not without their controversies; can personalised number plates really be worth the £2.3bn the ONS attributes to them? Nor are they to deny that some households and companies are still dangerously over-extended. Those with the debt and those with the assets tend to be different groups. QE has therefore tended to benefit the already rich at the expense of the poor.

But we have to deal in aggregates here, and the fact is that despite the financial crisis, Britain is still one of the wealthiest countries on the planet and getting wealthier by the day.

So despite a few minor quirks in the stats, Britain continues to get wealthier.

Good to know.

Now onto why rising house prices are so good for the recovery.

This growing wealth helps to explain the paradox of why consumption is recovering even though household income continues to be squeezed.

Most research in recent decades shows that wealth is at least as important in determining consumption as income. If people feel wealthier, they save less and spend more.

It is also perhaps why the Government has switched its attentions to measures to boost the housing market.

Housing wealth is far the most important component of UK net worth.

By supporting asset prices, QE has therefore also supported consumption and therefore nascent economic recovery.

Interesting.

It notes something that many of us have been mentioning for some time, re the importance of a property market recovery to the wider economic recovery....

If the bond market correction has further to go and equities are reckoned to be fully valued, where do you stick your money?

That’s a question investors are increasingly answering by venturing back into property – houses, and, and for those who dare, commercial real estate.

The financial crash has conditioned us to think of this as an undesirable, even dangerous, development. Yet the economy is not going to recover without it

http://www.telegraph.co.uk/finance/economics/10253268/Recovering-economy-needs-investors-prepared-to-take-a-property-risk.html

mystic_trev

Commercial Property is a much overlooked Investment. My REIT returns are up 28% this last year.:j

vivatifosi

mystic_trev wrote: »

Commercial Property is a much overlooked Investment. My REIT returns are up 28% this last year.:j

I agree. I've spent a reasonable amount of time looking at commercial property as part of being a pension trustee. I'm surprised that it isn't more widely considered. I would personally avoid a heavily retail portfolio though.

michaels

mystic_trev wrote: »

Commercial Property is a much overlooked Investment. My REIT returns are up 28% this last year.:j

Isn't it extremely volatile though? Surely if you buy at the wrong time it might be years/never before you get back what you invest?

ILW

Wouldn't investment into areas that produce jobs be better for the economy as a whole? Rather than just hoping for capital appreciation.

the_flying_pig

HAMISH_MCTAVISH wrote: »

So despite a few minor quirks in the stats, Britain continues to get wealthier.

Good to know.

Now onto why rising house prices are so good for the recovery.



Interesting.

It notes something that many of us have been mentioning for some time, re the importance of a property market recovery to the wider economic recovery....


http://www.telegraph.co.uk/finance/economics/10253268/Recovering-economy-needs-investors-prepared-to-take-a-property-risk.html

i'm going to go out on a limb & guess that in a hypothetical poll of financially literate people, over half would find issue with a couple of the points in the article and almost all would disagree with the daft estate agent's extrapolations that you make from it.

CLAPTON

most of us don't spend our housing wealth; we spend our income

Carl31

CLAPTON wrote: »

most of us don't spend our housing wealth; we spend our income

This

People will only spend more if they can see and feel the wealth they have at their disposal. This is cash, not the value of a house

You can have a house worth £1m, but if you only have £50 in your current account, you are not going to get far

Cash will be determined by income, probably salary for most, not the worth of their house. Salary hasnt exactly increased lately

Loughton_Monkey

I think the Telegraph boy speak with forked tongue.

He talks of £7.6 Trillion - which is the value of "Household and NPIHS" wealth only - therefore not including National Debt. NPISH, as we all know, is 'Non profit institutions serving households'.

Look at the proper figures (as on the graph), total net wealth went up from £7.201 Trillion to £7.275 Trillion, and increase of barely 1% which is well below inflation. We're all getting poorer in real terms.

To look at this yourself, Hamish, try here:

http://www.ons.gov.uk/ons/rel/cap-stock/the-national-balance-sheet/2013-estimates/tsd-national-balance-sheet--2013.html

mystic_trev

michaels wrote: »

Isn't it extremely volatile though? Surely if you buy at the wrong time it might be years/never before you get back what you invest?

Not really, most are underpinned by a pretty good NAV, and who's ever heard of Property going down As with any good saving strategy it should all be about holding a wide range of Investments.For instance my BTL's are doing OK, but they're the worst performer of all my Investments these past 12 months.Who'd have thunked it!!!

Tancred

The phrase 'net worth' is meaningless as it includes assets that are not practically accessible, e.g. pension funds and property. Your pension fund is meant to buy you an income upon retirement - nothing more. And a house is for living in - you can't rip out a few bricks and sell them for cash!