Knee deep in debt

Finweek English Edition - - Economic trends & analysis - HOWARD PREECE

SOUTH AFRICA’S RA­TIO of house­hold debt to dis­pos­able house­hold in­come has reached record lev­els.

But SA still looks pretty fru­gal com­pared with many other coun­tries. Bri­tain is one par­tic­u­lar high-profile ex­am­ple.

The debt/in­come level there is now at 140%.

SA’s debt ra­tio was 73,1% in the third quar­ter of 2006. That was a whack­ing rise on the 49,8% level at end-2002. This surge in debt lev­els – at least on this sys­tem of mea­sure­ment – has nat­u­rally caused a lot of con­cern.

But com­pare it with the sit­u­a­tion in the UK. • The Coun­cil for Mort­gage Lenders has an­nounced a 65% in­crease in the num­ber of houses re­pos­sessed last year com­pared with 2005. More than 100 000 in­di­vid­u­als de­clared them­selves bank­rupt in 2006 – and ex­perts think this could eas­ily rise to 150 000 this year. Jenny McCart­ney of the Sun­day Tele­graph says the UK stock of per­sonal debt has soared to £1 300bn, “mak­ing us one of the most in­debted coun­tries in the world.” Steve Hawkes of The Times ob­serves: “Bri­tain’s spi­ralling debt cri­sis has reached new heights. The to­tal num­ber of bank­rupt­cies and in­sol­ven­cies be­tween Oc­to­ber and De­cem­ber last year was 44% up on the same pe­riod in 2005.”

SA still looks pretty fru­gal com­pared with many

other coun­tries.

There is, how­ever, one mas­sive sta­tis­ti­cal fail­ing in the macro-analy­ses.

They take no ac­count – nor do the fig­ures for SA, or for al­most ev­ery other coun­try – of the colos­sal rise in the value of gross per­sonal as­sets, cru­cially from boom­ing house prices.

There have been some ca­su­al­ties, yes, but there have been vastly more suc­cesses. That ap­plies to SA as well as the UK. Mil­lions of home­own­ers in both coun­tries – as in­deed in the United States, Aus­tralia and else­where – are very well placed fi­nan­cially.

Re­mem­ber that amid all the tales of gloom.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.