Post on 18-Aug-2020
The Household Finance and Consumption SurveyThe Financial Position of Irish Households
Reamonn Lydon & Tara McIndoe-CalderCentral Bank of IrelandCBI
NERI, 22 April 2015
Disclaimer
Any views expressed here are my own.
The opinions expressed in this paper are those of theauthors and do not necessarily represent the views of theCentral Bank of Ireland or the ESCB.
R. Lydon NERI, April 2015 HFCS survey 2 / 36
Presentation outline
1. Background to HFCS2. Households’ balance sheets in 2013
É The impact of the crisisÉ The role of housing and debtÉ Debt burden
3. Comparisons with other Euro area countries4. Net wealth over time
R. Lydon NERI, April 2015 HFCS survey 3 / 36
1. Background to the HFCS
É QFAs show aggregate impact of crisis on income and wealthÉ Limited information at the household level
É HFCS 2013 fills this information gapÉ Household-level data on assets, debt and net wealthÉ The impact of policy on debt repayment burdensÉ Access to credit and credit constraintsÉ Consumption smoothing and portfolio selectionÉ Wealth distribution and the impact of macro-economic
shocks
É CBI Quarterly Bulletin Article to accompany the release
R. Lydon NERI, April 2015 HFCS survey 4 / 36
Survey Overview
HFCS fieldworkMarch - Sep 2013
5,419 households 14,546 individuals
Real assets, Financialassets, Liabilities,Credit constraints,Inheritance & gifts,Non-labour income,
Consumption & saving
Demographics,Employment, Future
pension entitlements,Labour related income
NB: Use of administrative sources to verify dataR. Lydon NERI, April 2015 HFCS survey 5 / 36
Comparisons between HFCS and other data (preliminary)
HFCS Agg. data SourceOther source
Total debt (ebn) e119.8 e117.2 CBI, M&B
Housing assets (ebn) e317.9 e331.0 CBI QFA
Deposits + savings (ebn) e33.3 e86.3 CBI
Food spend (e/month/hhld) 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
Gini coefficient (net income) 33.2 33.7 CSO, SILCGini coefficient (gross income) 39.7 40.9 CSO, SILC
(a) Imputed, following Browning et al. 2003
R. Lydon NERI, April 2015 HFCS survey 6 / 36
2. Households’ balance sheets in 2013
R. Lydon NERI, April 2015 HFCS survey 7 / 36
Big picture – composition of net wealth by age
-200
-100
0
100
200
300
400
500
-200
-100
0
100
200
300
400
500
<=29 30-39 40-49 50-59 60-69 70+
Other debt Mortgage on HMRFinancial assets Other real assetsOther property assets HMR assets (the home you live in)Total net wealth
€, '000s Average values within age cohort
Age- group
8% of hhlds
24% of hhlds
22% of hhlds
18% of hhlds
15% of hhlds
13% of hhlds
R. Lydon NERI, April 2015 HFCS survey 8 / 36
Participation in real & financial assets, by income decile
Any real assets HMR Other res
prop Other non-
res prop Other Real
Assets Any Financial
Assets Deposits
Other Financial Assets
% households 95.3 70.5 10.2 10.8 91.9 89.8 88.6 27.9
% Euro area 91.1 60.1 96.8 96.4
0
.2.4
.6.8
1F
ract
ion
of H
ouse
hold
s H
avin
g A
sset
0 1 2 3 4 5 6 7 8 9 10Decile of Gross Income
Household main res. Other residential propertyOther non-residential property Other Real AssetsDeposits Other financial assets
R. Lydon NERI, April 2015 HFCS survey 9 / 36
Median values & composition of assets, by income quintile
Conditional on participation Any assets HMR
Other res prop
Other non-res prop
Deposits Other
Financial Assets
Median value (€ ‘000s), Ireland 162.0 150.0 140.0 300.0 4.5 57.9
Median value (€ ‘000s), Euro area 144.8 180.3 { 103.4 } 6.1 53.0
0
.2.4
.6.8
1F
ract
ion
of v
alue
of t
otal
ass
ets
1 2 3 4 5
HMR Other real assetsDeposits Other Fin Assets
Income quintile
R. Lydon NERI, April 2015 HFCS survey 10 / 36
Composition of assets, by wealth quintile
�30.8k �30.4k �33.6k �37.7k �52.0k
0.2
.4.6
.81
Fra
ctio
n of
val
ue o
f tot
al a
sset
s
1 2 3 4 5
HMR Other real assetsDeposits Other Fin Assets
Median Net Income
R. Lydon NERI, April 2015 HFCS survey 11 / 36
Participation in debt, by income decile
Participation in debt Any debt HMR Mort Non-HMR Residential
Mort Other prop mort Non-mort debt
% Irish households 56.8 33.9 4.3 2.0 41.4
% Euro area households 43.7 19.0 { 5.6 } 29.3
0
.2.4
.6.8
Fra
ctio
n of
Hou
seho
lds
Hav
ing
Deb
t
0 1 2 3 4 5 6 7 8 9 10Decile of Gross Income
Total debt HMR MortgageOther Mortgages Non-collateralised debt
R. Lydon NERI, April 2015 HFCS survey 12 / 36
Participation in debt, by age cohort
0.2
.4.6
.8F
ract
ion
of H
ouse
hold
s H
avin
g D
ebt
18-34 35-44 45-54 55-64 64-74 75+Age of reference person (years)
Total debt HMR MortgageOther Mortgages Non-collateralised debt
R. Lydon NERI, April 2015 HFCS survey 13 / 36
Median values & composition of debt, by income decile
Any debt HMR Mort
Non-HMR Residential Mort Other prop mort Non-mort debt
Median value (€, ‘000s), Ireland 63.0 129.0 157.0 99.0 3.9
Median value (€, ‘000s), Euro area 21.5 65.2 { 56.8 } 5.0
0
2040
6080
100
Fra
ctio
n of
val
ue o
f tot
al d
ebt/
% w
ith d
ebt
0 2 4 6 8 10
HMR Non-HMR MortgageNon-Collateralised Households with any debt (%)
R. Lydon NERI, April 2015 HFCS survey 14 / 36
Debt burden
High levels of debt participation and outstanding amounts of Irishhouseholds relative to the Euro Area.
É Examine debt service across the age distribution.
É Does debt taken out by different groups varies by theirincome and asset positions?
É Allows us to gauge the debt burden.
É Unless otherwise stated, charts relating to debt ordebt-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 Revenuedistributions.
R. Lydon NERI, April 2015 HFCS survey 15 / 36
Debt to net income (any debt), by age cohort
01
23
45
24 29 34 39 44 49 54 59 64 69 74Age (5-year bands)
25th_percentile Median_percentile75th_percentile
Debt-to-net-income-ratio
R. Lydon NERI, April 2015 HFCS survey 16 / 36
Property debt-service to net income ratio (conditional on debt)
R. Lydon NERI, April 2015 HFCS survey 17 / 36
Distribution of debt-service-to-income ratio, by gross incomequintile
0.2
.4.6
.81
Fra
ctio
n of
Hhl
ds w
ith D
-S r
atio
> th
resh
old
0 .1 .2 .3 .4 .5 .6Debt-service ratio
Q1 Q2Q3 Q4Q5
R. Lydon NERI, April 2015 HFCS survey 18 / 36
Ratio of outstanding HMR debt to value(conditional on having an HMR mortgage)
0.5
11.
5
24 29 34 39 44 49 54 59 64 69Age (5-year bands)
25th_percentile Median_percentile75th_percentile
Loan_to_value_ratio
R. Lydon NERI, April 2015 HFCS survey 19 / 36
3. Comparisons with other Euro Area (EA countries
Irish households . . .
É . . . more likely to own their homeÉ . . . have fewer financial assetsÉ . . . are more indebtedÉ . . . income and wealth distributions very similar to EA
But! Keep in mind that they also tend to be . . .
É . . . younger: 18% retired versus 32%É . . . in workless households: 28% versus 11%
R. Lydon NERI, April 2015 HFCS survey 20 / 36
70.5% of Irish households have a HMR asset, versus 60.1% inEuro area
89.9
82.7
81.8
77.7
76.7
72.4
71.5
70.5
69.6
68.7
67.8
67.1
60.1
57.1
55.3
47.7
44.2
0 20 40 60 80 100Percentage of households with a HMR asset
Slovakia (2010)Spain (2008)
Slovenia (2010)Malta (2010)
Cyprus (2010)Greece (2009)
Portugal (2010)Ireland (2013)
Belgium (2010)Italy (2010)
Finland (2009)Luxembourg (2010)Euro area (wave 1)Netherlands (2009)
France (2010)Austria (2010)
Germany (2010)
R. Lydon NERI, April 2015 HFCS survey 21 / 36
Wealth inequality is negatively correlated with home-ownership
DE AT
FR NL
ALL LU
FI
IT BE
PT
CY
GR
MT
ES
SI
SK
IRL
0.4
0.5
0.6
0.7
0.8
0.4 0.5 0.6 0.7 0.8 0.9
Gin
i co
eff
icie
nt
Home ownership (per cent)
Gini coefficient for NET WEALTH and home ownership
R. Lydon NERI, April 2015 HFCS survey 22 / 36
Lower participation rates in financial assets in Ireland
Financial assets account for just 13% of gross assets
0
20
40
60
80
100
Any fin assets Deposits Bonds ormutual funds
Shares Voluntarypension
Other financialassets
Participation in financial assets
Ireland (2013)
Euro Area (wave 1)
R. Lydon NERI, April 2015 HFCS survey 23 / 36
Net liquid assets to gross income ratio: Euro area comparison
75.7
33.5
32.9
22.3
21.9
20.7
18.6
18.5
16.4
15.9
12.3
12.1
9.4
6.4
5.1
4.9
2.2
0 20 40 60 80Net liquid assets/income
Malta (2010)Belgium (2010)Austria (2010)
Germany (2010)Italy (2010)
Luxembourg (2010)Euro Area (wave 1)
France (2010)Netherlands (2009)
Portugal (2010)Spain (2008)
Slovakia (2010)Finland (2009)Ireland (2013)Cyprus (2010)Greece (2009)
Slovenia (2010)
R. Lydon NERI, April 2015 HFCS survey 24 / 36
Debt-to-assets: Ireland -v- EA
41.3
37.7
34.6
28.4
25.7
21.8
18.9
18.2
18.2
17.9
17
16.7
14.8
11.7
6.6
6.2
3.9
0 10 20 30 40Debt to asset ratio
Netherlands (2009)Ireland (2013)Finland (2009)
Germany (2010)Portugal (2010)
Euro Area (wave 1)France (2010)
Luxembourg (2010)Belgium (2010)
Spain (2008)Cyprus (2010)Austria (2010)Greece (2009)
Italy (2010)Slovakia (2010)
Malta (2010)Slovenia (2010)
R. Lydon NERI, April 2015 HFCS survey 25 / 36
Debt-to-gross income: Ireland -v- EA
194.1
157
134
113.5
100.4
86.9
79.8
64.3
62
52
50.4
50.3
47.2
37.3
35.6
26.6
22.7
0 50 100 150 200Debt to income ratio
Netherlands (2009)Cyprus (2010)
Portugal (2010)Spain (2008)
Ireland (2013)Luxembourg (2010)
Belgium (2010)Finland (2009)
Euro Area (wave 1)Malta (2010)
France (2010)Italy (2010)
Greece (2009)Germany (2010)
Austria (2010)Slovenia (2010)Slovakia (2010)
R. Lydon NERI, April 2015 HFCS survey 26 / 36
Mortgage-service to gross income ratio: Euro area comparison
25.3
20.5
20.4
17.4
16.7
16.4
16.3
15.9
15.8
15.5
14.8
14.2
12.8
12.8
11.7
4.6
0 5 10 15 20 25Mortgage service to income ratio
Cyprus (2010)Spain (2008)
Slovakia (2010)France (2010)
Portugal (2010)Greece (2009)
Luxembourg (2010)Euro Area (wave 1)
Ireland (2013)Italy (2010)
Belgium (2010)Netherlands (2009)
Malta (2010)Germany (2010)Slovenia (2010)
Austria (2010)Finland (2009)
R. Lydon NERI, April 2015 HFCS survey 27 / 36
Net wealth distribution (gini coefficient 0.64)
020
4060
8010
0C
umul
ativ
e sh
are
of n
et w
ealth
0 20 40 60 80 100Cumulative share of households
Net wealth (Ireland) Net wealth (US)Net wealth (EA)
Median net wealth values: Ireland e105k, Euro area e109kR. Lydon NERI, April 2015 HFCS survey 28 / 36
Income distribution
020
4060
8010
0C
umul
ativ
e sh
are
of in
com
e
0 20 40 60 80 100Cumulative share of households
Income (Ireland) Income (US)Income (EA)
R. Lydon NERI, April 2015 HFCS survey 29 / 36
Net wealth and gross income correlation, by age
R. Lydon NERI, April 2015 HFCS survey 30 / 36
3. Net wealth over time
R. Lydon NERI, April 2015 HFCS survey 31 / 36
Net wealth gini 2006-2013
60
61
62
63
64
65
66
67
68
69
70
60
61
62
63
64
65
66
67
68
69
70
2006 2007 2008 2009 2010 2011 2012 2013
Gini coefficient for net wealth: 2006 -2013
R. Lydon NERI, April 2015 HFCS survey 32 / 36
Net wealth 1987 v . 2013 (2)
1987 distribution from Nolan (CBA, 1991) – similar meth. to HFCS
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
0 10 20 30 40 50 60 70 80 90 100
Lorenze curves net wealth
Nolan (1987)
HFCS (2013)
Share of wealth in… 1987 2013
Bottom 50% 12.2% 4.5% Bottom 70% 28.5% 17.1% Top 30% 71.5% 82.9% Top 10% 42.3% 53.0% Top 5% 29.0% 36.0% Top 1% 10.0% 12.1%
Gini: 1987 = 52, 2013 = 64R. Lydon NERI, April 2015 HFCS survey 33 / 36
What drove this shift in the distribution of wealth?
Need to look at the composition of assets
HFCS 2013 Bottom
70% Next 20% Top 10% Top 1% All
HMR 74% 64% 25% 14% 46%
Other resi property 5% 6% 9% 9% 7% Other non-resi property 4% 15% 48% 49% 29%
Financial assets 17% 15% 19% 28% 17%
100% 100% 100% 100% 100%
Nolan 1987 HMR 88% 67% 31% 20% 59%
Other resi property 2% 4% 7% 9% 4% Other non-resi property 4% 20% 52% 60% 28%
Financial assets 7% 9% 10% 11% 9%
100% 100% 100% 100% 100%
So, property prices are large part – but not all – of the story.
R. Lydon NERI, April 2015 HFCS survey 34 / 36
Increasing indebtedness also a factor . . .
Because we are looking at net wealth, must also takeaccount of increasing indebtedness
0
1
2
3
4
5
1987 2013
Ratio of HMR debt-to-gross income
Top 25%... Bottom 75%...
R. Lydon NERI, April 2015 HFCS survey 35 / 36
Conclusions – what’s next?
New data set, still a lot to understand – e.g. financial assets?
Several ongoing research projects involving the use ofmicro-simulation to better understand macro outcomes such ashousehold 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
R. Lydon NERI, April 2015 HFCS survey 36 / 36