80% of Pakistanis’ wealth comprises residential buildings: World Bank
According to a new World Bank study, Pakistani households accumulate significant net worth but overwhelmingly in the form of residential buildings, and on average nearly 80 percent of the wealth accumulated by age 60 to 65 is composed of residential buildings.
The average Pakistani household’s net worth grows by 60 months’ worth of consumption (5 years) between ages 25 and 65. The bulk of this increase is in the form of residential housing, whereas other forms of wealth such as land, durables, business and farm values and financial assets stagnate over the life cycle. Asset accumulation is slower early in the life cycle and picks up speed between ages 40 and 65.
The combined forces of population aging, weakening family and village risk-sharing networks, and low formal pension coverage will make financing elderly consumption a major challenge for the future, says the study, “Life Cycle Savings in a High-Informality Setting — Evidence from Pakistan”, released earlier this week.
The fact that households primarily save in real estate and land signals that this is considered a safe investment, relative to other available options. Housing may be a way to store resources for the long run in a way that cannot easily be stolen or appropriated by other family members, observes the study.
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