Reamonn Lydon & Tara McIndoe-Calder Central Bank of ... · Food spend (e/month/hhld) e682.2 e655.3...

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


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


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


2. Households’ balance sheets in 2013


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


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


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


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


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


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


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 (%)


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.


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


Property debt-service to net income ratio (conditional on debt)


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


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


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%


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)


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


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)


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)


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)


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)


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)


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)


Net wealth and gross income correlation, by age


3. Net wealth over time


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


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.


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%...


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


Reamonn Lydon & Tara McIndoe-Calder Central Bank of ... · Food spend (e/month/hhld) e682.2 e655.3...

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