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February 3, 2023

Population’s net wealth, down since 2007, due to decreasing price of real estate

Population’s net wealth is down compared to 2007 when it saw a peak, mainly due to decreasing prices of real estate assets owned by Romanians. As to the indebtedness level of the population, the situation is very differentiated between certain segments, Deputy Governor of Romania’s Central Bank (BNR) Liviu Voinea (photo) told Wednesday’s symposium ‘Financial Stability – Conceptual Landmarks and Topical Themes,’ held at the BNR’s seat.
‘In the peak year 2008, the ratio was 4.5 to 1 between real assets and net financial assets, and now it stands at under 2 to 1 due to two factors over the past five years. On the one hand, the reduction in the price of real estate assets owned by the population, and on the other hand the increase in net financial assets. However, population’s net wealth declined compared to 2007, the peak level, because the reduction in real estate prices was higher than the increase in net financial assets. Now, the net wealth of the population is five times higher than the annual income available,’ said the BNR’s deputy governor.
As to the indebtedness level of the population, the BNR official said this is one of the lowest in Europe, overall, but Romania has much more over-indebted households. ‘On the one hand, we have one of the lowest shares among European countries in terms of population’s debt in gross annual income available, but on the other hand, we have one of the highest shares regarding over-indebted households, that is those households with difficulties to pay current debts. That is why, the policies to be taken in this sense must be differentiated, because the situation is differentiated,’ Liviu Voinea explained.
The BNR official underscored that population’s indebtedness is only one of the segments the BNR is looking at in its effort to ensure financial stability, with other segments being related to the banking system’s capacity to withstand major shocks, but also the situation of the real economy.


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