TOTAL HOUSEHOLD wealth in the State shrank by €150 billion last year, but personal savings have risen to 10 per cent of disposable income, according to National Irish Bank (NIB).

A report published yesterday by NIB, The Emerald Isle – Wealth in a Downturn, showed that after a long period of strong growth, the level of aggregate household wealth underwent a dramatic reversal in 2008.

“While aggregate household wealth peaked at the height of the property boom, the effect of the economic crisis reduced this by €150 billion in the 12 months to the end of 2008,” the report said.

“By the time the housing market bottoms out in 2010, the aggregate loss in wealth from its 2006 peak is likely to be significantly higher than this,” it predicted.

A combination of falling asset values and rising liabilities has squeezed the average net worth of Irish households, which has declined by almost 30 per cent since the property market peaked in 2006.

The average net worth of Irish households fell to €406,000 in 2008, down €145,000 from its peak.

Households have responded by significantly increasing their rate of saving which, according to the report, reached 10 per cent of disposable income in January this year.

This compares to a low of 3 per cent in 2007.

“Irish households are managing their wealth through unprecedented times, and are reacting by rapidly increasing their rate of saving,” according to Garvan Callan, head of wealth management at NIB.

“Caution is the key word though, as savers should be thinking beyond the very short term, and plan their investments in the context of today’s low interest rate environment,” Mr Callan added.