The Household Finance and Consumption Survey
The Financial Position of Irish Households
Reamonn Lydon & Tara McIndoe-Calder
Central Bank of Ireland
CBI
NERI, 22 April 2015
Disclaimer
Any views expressed here are my own.
The opinions expressed in this paper are those of the
authors and do not necessarily represent the views of the
Central Bank of Ireland or the ESCB.
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HFCS survey
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Presentation outline
1. Background to HFCS
2. Households’ balance sheets in 2013
É
É
É
The impact of the crisis
The role of housing and debt
Debt burden
3. Comparisons with other Euro area countries
4. Net wealth over time
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1. Background to the HFCS
É
QFAs show aggregate impact of crisis on income and wealth
É
Limited information at the household level
É
HFCS 2013 fills this information gap
É
É
É
É
É
É
Household-level data on assets, debt and net wealth
The impact of policy on debt repayment burdens
Access to credit and credit constraints
Consumption smoothing and portfolio selection
Wealth distribution and the impact of macro-economic
shocks
CBI Quarterly Bulletin Article to accompany the release
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Survey Overview
HFCS fieldwork
March - Sep 2013
5,419 households
Real assets, Financial
assets, Liabilities,
Credit constraints,
Inheritance & gifts,
Non-labour income,
Consumption & saving
14,546 individuals
Demographics,
Employment, Future
pension entitlements,
Labour related income
NB: Use of administrative sources to verify data
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Comparisons between HFCS and other data (preliminary)
HFCS
Agg. data
Other source
Source
Total debt (ebn)
e119.8
e117.2
CBI, M&B
Housing assets (ebn)
e317.9
e331.0
CBI QFA
e33.3
e86.3
CBI
e682.2
e655.3
CSO, NIE
Non-dur’s & servicesa (e/month/hhld)
e2,527.3
e2,597.2
CSO, NIE
Income (gross equivalised)
e538.06
e537.66
CSO, SILC
33.2
39.7
33.7
40.9
CSO, SILC
CSO, SILC
Deposits + savings (ebn)
Food spend (e/month/hhld)
Gini coefficient (net income)
Gini coefficient (gross income)
(a) Imputed, following Browning et al. 2003
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2. Households’ balance sheets in 2013
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Big picture – composition of net wealth by age
500
500
€, '000s
Average values within age cohort
400
400
300
300
200
200
100
100
0
0
-100
-200
-100
8% of
hhlds
Age- <=29
group
24% of
hhlds
30-39
22% of
hhlds
40-49
18% of
hhlds
50-59
Other debt
Financial assets
Other property assets
Total net wealth
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15% of
hhlds
13% of
hhlds
60-69
70+
-200
Mortgage on HMR
Other real assets
HMR assets (the home you live in)
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Participation in real & financial assets, by income decile
Any real assets
HMR
% households
95.3
70.5
% Euro area
91.1
60.1
Other res
prop
10.2
Other nonres prop
10.8
Other Real
Assets
91.9
Any Financial
Assets
89.8
88.6
Other Financial
Assets
27.9
96.4
0
Fraction of Households Having Asset
.2
.4
.6
1
.8
96.8
Deposits
0
1
2
3
4
5
6
Decile of Gross Income
Household main res.
Other non-residential property
Deposits
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7
8
9
10
Other residential property
Other Real Assets
Other financial assets
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Median values & composition of assets, by income quintile
Any assets
HMR
162.0
144.8
150.0
180.3
Other res
prop
Conditional on participation
Median value (€ ‘000s), Ireland
140.0
{
300.0
103.4
}
4
5
Deposits
4.5
6.1
Other
Financial
Assets
57.9
53.0
0
Fraction of value of total assets
.4
.2
.6
.8
1
Median value (€ ‘000s), Euro area
Other non-res
prop
1
2
3
Income quintile
HMR
Deposits
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NERI, April 2015
Other real assets
Other Fin Assets
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Fraction of value of total assets
.2
.8
.4
.6
1
Composition of assets, by wealth quintile
30.4k
33.6k
37.7k
52.0k
1
2
3
4
5
0
30.8k
Median Net Income
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HMR
Deposits
NERI, April 2015
Other real assets
Other Fin Assets
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Participation in debt, by income decile
Participation in debt
Any debt
HMR Mort
% Irish households
56.8
43.7
33.9
19.0
Other prop mort
Non-mort debt
2.0
41.4
29.3
4.3
{
5.6
}
0
Fraction of Households Having Debt
.6
.4
.8
.2
% Euro area households
Non-HMR Residential
Mort
0
1
2
3
4
5
6
Decile of Gross Income
Total debt
Other Mortgages
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7
8
9
10
HMR Mortgage
Non-collateralised debt
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0
Fraction of Households Having Debt
.8
.2
.4
.6
Participation in debt, by age cohort
18-34
35-44
45-54
55-64
Age of reference person (years)
Total debt
Other Mortgages
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NERI, April 2015
64-74
75+
HMR Mortgage
Non-collateralised debt
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Median values & composition of debt, by income decile
Median value (€, ‘000s), Ireland
HMR Mort
Non-HMR Residential
Mort
Other prop mort
Non-mort debt
63.0
21.5
129.0
65.2
157.0
{
99.0
}
3.9
5.0
56.8
0
Fraction of value of total debt/ % with debt
20
60
100
40
80
Median value (€, ‘000s), Euro area
Any debt
0
2
4
HMR
Non-Collateralised
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6
8
10
Non-HMR Mortgage
Households with any debt (%)
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Debt burden
High levels of debt participation and outstanding amounts of Irish
households relative to the Euro Area.
É
Examine debt service across the age distribution.
É
Does debt taken out by different groups varies by their
income and asset positions?
É
Allows us to gauge the debt burden.
É
Unless otherwise stated, charts relating to debt or
debt-service are conditional on having some form of debt.
É
Some metrics use net income – this is not a HFCS variable:
É
our estimate compares favourably with Revenue
distributions.
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Debt to net income (any debt), by age cohort
0
1
2
3
4
5
Debt-to-net-income-ratio
24
29
34
39
44
49
54
Age (5-year bands)
25th_percentile
75th_percentile
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59
64
69
74
Median_percentile
HFCS survey
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Property debt-service to net income ratio (conditional on debt)
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Fraction of Hhlds with D-S ratio > threshold
.8
.2
.4
.6
1
Distribution of debt-service-to-income ratio, by gross income
quintile
Q2
Q4
0
Q1
Q3
Q5
0
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.1
.2
.3
Debt-service ratio
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.4
.5
.6
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Ratio of outstanding HMR debt to value
(conditional on having an HMR mortgage)
0
.5
1
1.5
Loan_to_value_ratio
24
29
34
39
44
49
54
Age (5-year bands)
25th_percentile
75th_percentile
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59
64
69
Median_percentile
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3. Comparisons with other Euro Area (EA countries
Irish households . . .
É
. . . more likely to own their home
É
. . . have fewer financial assets
É
. . . are more indebted
É
. . . income and wealth distributions very similar to EA
But! Keep in mind that they also tend to be . . .
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. . . younger: 18% retired versus 32%
É
. . . in workless households: 28% versus 11%
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70.5% of Irish households have a HMR asset, versus 60.1% in
Euro area
Germany (2010)
Austria (2010)
France (2010)
Netherlands (2009)
Euro area (wave 1)
Luxembourg (2010)
Finland (2009)
Italy (2010)
Belgium (2010)
Ireland (2013)
Portugal (2010)
Greece (2009)
Cyprus (2010)
Malta (2010)
Slovenia (2010)
Spain (2008)
Slovakia (2010)
44.2
47.7
55.3
57.1
60.1
67.1
67.8
68.7
69.6
70.5
71.5
72.4
76.7
77.7
81.8
82.7
89.9
0
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20
40
60
80
Percentage of households with a HMR asset
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100
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Wealth inequality is negatively correlated with home-ownership
Gini coefficient for NET WEALTH and home ownership
0.8
DE
AT
FI
Gini coefficient
0.7
FR
NL
ALL
CY
LU
PT
IRL
IT
0.6
BE
MT
ES
GR
SI
0.5
SK
0.4
0.4
0.5
0.6
0.7
0.8
0.9
Home ownership (per cent)
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Lower participation rates in financial assets in Ireland
Financial assets account for just 13% of gross assets
Participation in financial assets
100
Ireland (2013)
Euro Area (wave 1)
80
60
40
20
0
Any fin assets
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Deposits
Bonds or
mutual funds
NERI, April 2015
Shares
Voluntary
pension
Other financial
assets
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Net liquid assets to gross income ratio: Euro area comparison
Slovenia (2010)
Greece (2009)
Cyprus (2010)
Ireland (2013)
Finland (2009)
Slovakia (2010)
Spain (2008)
Portugal (2010)
Netherlands (2009)
France (2010)
Euro Area (wave 1)
Luxembourg (2010)
Italy (2010)
Germany (2010)
Austria (2010)
Belgium (2010)
Malta (2010)
2.2
4.9
5.1
6.4
9.4
12.1
12.3
15.9
16.4
18.5
18.6
20.7
21.9
22.3
32.9
33.5
75.7
0
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20
40
60
Net liquid assets/income
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80
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Debt-to-assets: Ireland -v- EA
Slovenia (2010)
Malta (2010)
Slovakia (2010)
Italy (2010)
Greece (2009)
Austria (2010)
Cyprus (2010)
Spain (2008)
Belgium (2010)
Luxembourg (2010)
France (2010)
Euro Area (wave 1)
Portugal (2010)
Germany (2010)
Finland (2009)
Ireland (2013)
Netherlands (2009)
3.9
6.2
6.6
11.7
14.8
16.7
17
17.9
18.2
18.2
18.9
21.8
25.7
28.4
34.6
37.7
41.3
0
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10
20
30
Debt to asset ratio
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40
HFCS survey
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Debt-to-gross income: Ireland -v- EA
Slovakia (2010)
Slovenia (2010)
Austria (2010)
Germany (2010)
Greece (2009)
Italy (2010)
France (2010)
Malta (2010)
Euro Area (wave 1)
Finland (2009)
Belgium (2010)
Luxembourg (2010)
Ireland (2013)
Spain (2008)
Portugal (2010)
Cyprus (2010)
Netherlands (2009)
22.7
26.6
35.6
37.3
47.2
50.3
50.4
52
62
64.3
79.8
86.9
100.4
113.5
134
157
194.1
0
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50
100
150
Debt to income ratio
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200
HFCS survey
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Mortgage-service to gross income ratio: Euro area comparison
Finland (2009)
Austria (2010)
Slovenia (2010)
Germany (2010)
Malta (2010)
Netherlands (2009)
Belgium (2010)
Italy (2010)
Ireland (2013)
Euro Area (wave 1)
Luxembourg (2010)
Greece (2009)
Portugal (2010)
France (2010)
Slovakia (2010)
Spain (2008)
Cyprus (2010)
4.6
11.7
12.8
12.8
14.2
14.8
15.5
15.8
15.9
16.3
16.4
16.7
17.4
20.4
20.5
25.3
0
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5
10
15
20
Mortgage service to income ratio
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25
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0
Cumulative share of net wealth
20
40
60
80
100
Net wealth distribution (gini coefficient 0.64)
0
20
40
60
Cumulative share of households
Net wealth (Ireland)
Net wealth (EA)
80
100
Net wealth (US)
Median net wealth values: Ireland e105k, Euro area e109k
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0
Cumulative share of income
40
80
20
60
100
Income distribution
0
20
40
60
Cumulative share of households
Income (Ireland)
Income (EA)
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80
100
Income (US)
HFCS survey
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Net wealth and gross income correlation, by age
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3. Net wealth over time
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Net wealth gini 2006-2013
Gini coefficient for net wealth: 2006 -2013
70
70
69
69
68
68
67
67
66
66
65
65
64
64
63
63
62
62
61
61
60
60
2006
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2007
2008
2009
2010
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2011
2012
2013
HFCS survey
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Net wealth 1987 v . 2013 (2)
1987 distribution from Nolan (CBA, 1991) – similar meth. to HFCS
Lorenze curves net wealth
100
100
Nolan (1987)
90
90
HFCS (2013)
80
Share of wealth in…
Bottom 50%
Bottom 70%
Top 30%
Top 10%
Top 5%
Top 1%
70
60
50
40
1987
12.2%
28.5%
71.5%
42.3%
29.0%
10.0%
80
2013
4.5%
17.1%
82.9%
53.0%
36.0%
12.1%
70
60
50
40
30
30
20
20
10
10
0
0
0
10
20
30
40
50
60
70
80
90
100
Gini: 1987 = 52, 2013 = 64
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What drove this shift in the distribution of wealth?
Need to look at the composition of assets
HFCS 2013
HMR
Other resi property
Other non-resi
property
Financial assets
Nolan 1987
HMR
Other resi property
Other non-resi
property
Financial assets
Bottom
70%
74%
5%
Next 20%
64%
6%
Top 10%
25%
9%
Top 1%
14%
9%
All
46%
7%
4%
17%
100%
15%
15%
100%
48%
19%
100%
49%
28%
100%
29%
17%
100%
88%
2%
67%
4%
31%
7%
20%
9%
59%
4%
4%
7%
100%
20%
9%
100%
52%
10%
100%
60%
11%
100%
28%
9%
100%
So, property prices are large part – but not all – of the story.
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Increasing indebtedness also a factor . . .
Because we are looking at net wealth, must also take
account of increasing indebtedness
5
Ratio of HMR debt-to-gross income
Top 25%... Bottom 75%...
4
3
2
1
0
1987
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2013
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Conclusions – what’s next?
New data set, still a lot to understand – e.g. financial assets?
Several ongoing research projects involving the use of
micro-simulation to better understand macro outcomes such as
household spending, amongst other things.
Much work to be done in order to build a robust (& credible)
simulated dataset.
Comments & suggestions are very welcome at this stage
Thank you
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HFCS survey
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