The concentration of wealth among the eurozone’s richest has increased since the bloc’s debt crisis began, with poor families suffering the biggest drop in asset values, a survey released by the European Central Bank showed.
The eurozone’s top five per cent of households owned 37.8 per cent of net wealth in 2014, up from 37.2 per cent in 2010 while the bottom five per cent owned only debt, the ECB said, based on a survey of 84,000 households.
Suffering from waves of recession, the bloc’s protracted debt problem has worsened inequalities as states on the periphery like Italy, Spain, Portugal and Greece struggled, while those in the core, like Germany, were quicker to recover.
The fall in net wealth was mainly driven by a reduction in the value of assets, in particular real estate
The median wealth of a eurozone household dropped around 10 per cent to €104,100 in the four years to 2014, mostly as property prices fell, especially for the poorest fifth of the population, the ECB said.
“The shift was particularly substantial in Greece and Cyprus, where the median fell by roughly 40 per cent... but it is also large in Italy, Portugal, and Spain, where it declined by more than 15 per cent,” the ECB said,” the ECB said.
Bucking the trend, median wealth in German, the bloc’s economic powerhouse, increased by 10 per cent over the same period. It also edged up in Austria, Finland and Luxembourg.
To reach the top 10 per cent, households needed to hold net wealth of €496,000 or more, while the lowest 10 per cent had €1,000 or less.
“The fall in net wealth was mainly driven by a reduction in the value of assets, in particular real estate,” the ECB said. “The decline in net wealth was higher for leveraged households, especially homeowners with a mortgage, compared with outright homeowners and renters.”
The property price fall, a consequence of the bloc’s economic crunch, hurt the poorest the most – real estate wealth was down by a fifth for the poorest 40 per cent, twice the rate of the drop affecting the richest 20 per cent, the ECB said.
Families in Luxembourg, where the financial sector dominates the economy, were the richest, with a median net wealth of €437,500. In the formerly Soviet, Baltic state of Latvia, it was just €14,200. Malta’s stood at around €175,000.
Malta fact file
• Malta is one of only three eurozone countries where home ownership is over 80 per cent, compared to the eurozone average of 61.2 per cent.
• Over a third of Maltese households (34.4 per cent) have real estate property other than their main home – and yet only 6.4 per cent reportedly earned income from renting properties. In an effort to curb this blatant underdeclaration, the government launched a 15 per cent withholding tax on rent, applicable on rental income earned as from January 2014.
• Almost a quarter of the Maltese hold bonds (22.4 per cent) – the highest rate in the eurozone and dramatically higher than the average of 3.89 per cent.
• Over a third of the Maltese (37.1 per cent) had some form of debt, ranging from mortgages to credit card debt. This is pretty much in line with the rest of the eurozone, where the average was 43.31 per cent, with the Netherlands having the highest at 63.1 per cent, and the lowest in Italy where only 21.2 per cent held any debts.
Source: European Central Bank – data from 2013