Household Finance and Consumption Survey - Frequently Asked Questions

About the survey

Why are central banks interested in household finance data?

The two most important reasons are that such data

• help gain a better understanding of the transmission mechanism of monetary policy and
• allow the impact of shocks on financial stability to be analysed.

This structural information makes it possible to study the concentration of debt and assets across certain sub-groups of households, such as younger households, or low-income households, or credit-constrained households. The survey also provides important insights which can be of help when economists model the response of such households to various shocks.

Are similar surveys conducted by central banks outside the euro area?

The US Federal Reserve conducts the Survey of Consumer Finances (SCF) every three years to provide detailed information on the finances of US households. The SCF is comparable to the HFCS. Similar surveys are conducted, or currently being planned, in other economies, very often under the auspices of the respective central bank.

What types of data are collected?

The survey collects detailed household-level data on various elements of households’ balance sheets, and related economic and demographic variables, including income, pensions, employment and measures of consumption.

What is the coverage of the sample in terms of households and with respect to assets and liabilities?

In terms of households, the survey covers private households that reside in the respective national territory, irrespective of the citizenship of their members, at the time the data are collected. Persons living in collective households and in institutions are excluded from the target population.

A person will be considered a usually resident member of the household if he/she spends most of his/her daily night-rest there, evaluated over the past six months. A more precise definition, as well as more details on the treatment of specific cases (e.g. children in shared custody, live-in domestic servants, children undergoing education away from home, persons working away from home, etc.), is provided in Eurosystem Household Finance and Consumption Network, “The Eurosystem Household Finance and Consumption Survey – methodological report for the first wave”, Statistics Paper Series, No 1, ECB, April 2013.

Non-residents are generally excluded from participating in the survey (exceptionally, some non-residents may be covered if they are part of a household resident in the country concerned (e.g. non-independent students or other dependent household members who do not have a separate household elsewhere).

In terms of assets, the survey covers assets/liabilities held/incurred by the surveyed households, including assets and liabilities abroad, such as property in other countries, deposits and securities in custody with foreign banks, etc.

The wealth figures provided by the survey also include the current value of households’ private pension plans and life-insurance policies, but do not include the value of public and occupational pension schemes. This is due to the difficulty of reliably measuring such assets in the case of unfunded pension schemes. In addition, in aggregate statistics (namely in the national accounts) the value of public pensions is not part of the core accounts of the general government and the household sector but is rather recorded in satellite accounts.

Access to public services (education, medical services, etc.) by households is not part of the standard measures of household wealth and is thus not covered by the survey.

How do respondents calculate the value of their assets?

The survey collects self-assessed values provided by the household, for which they are encouraged, wherever possible, to use supportive documentation (e.g. account statements provided by their banks, tax returns, etc.). This is a deliberate choice, given the goal of using the survey to study the behaviour of individual households. To this end, it is important to understand how households themselves assess the value of their assets and liabilities, as such self-perceptions typically drive economic decisions taken by households. Arguably, particularly in the case of property, self-assessed values may not always coincide with market prices. According to the plausibility checks carried out on the basis of available external data sources in each country, the values reported for the household’s main residence were largely consistent with those given by such sources. In general, the quality of the survey results depends on the quality of the information given by respondents to interviewers.

Were households in the highest wealth/income brackets more likely to refuse to participate? If so, how did you compensate for that?

All surveys have difficulties in accurately capturing the “tails” of the distribution, i.e. the very rich or very poor households. The evidence on the participation rates of wealthy households was mixed. These households tend to be more difficult to contact, and even when contact is established they may be reluctant to participate. For that reason, most countries oversampled wealthy households, meaning that more of these households were included in the sample in order to ensure a good representation of their wealth in the final results. Differences in the representation of various household groups were then adjusted with survey weights, meaning that the final results should represent the whole population correctly and evenly.

A special case is that of the extremely wealthy households, for instance those accounting for the top 1% of the wealth distribution. In these cases, the above-mentioned factors become even more important. Arguably, anonymising such outlier information could prove to be impossible. Consequently, extremely wealthy households are usually underrepresented in wealth surveys. It is a well-known fact that household wealth is distributed rather unevenly, so that a significant proportion thereof is accounted for by a relatively small number of households. This may have effects on the aggregate figures (rather less on the distribution), and such effects are difficult to measure.

Was the survey conducted in all euro area countries?

The survey was conducted in 15 euro area countries. Ireland and Estonia did not participate in the first wave. These two countries plan to conduct the survey as from the second wave.

What is the Household Finance and Consumption Network (HFCN)?

The network is composed of researchers, statisticians and survey specialists from the ECB, the Eurosystem national central banks (NCBs), four national statistical institutes (those of France, Finland, Estonia and Portugal) and a number of experts in the field of household finances who act as consultants. The mandate given to the HFCN comprises developing and conducting the Eurosystem Household Finance and Consumption Survey (HFCS) and acting as a forum for research with the survey data.

How is the survey conducted?

The HFCS is conducted in a decentralised fashion. Each of the institutions participating in the HFCN (the NCB or the national statistical institutes) is responsible for conducting the survey, and the ECB, together with the HFCN, coordinates the project, ensuring the application of a common methodology, pooling and quality-proofing the country datasets and disseminating the survey results and micro-data through a single access gateway.

When were the data collected? How frequently will they be collected in the future? When will the data for the next wave be collected and released?

Most of the fieldwork took place in 2010. In Greece and Spain, the data were collected in 2009 and 2008-09 respectively. The survey will be conducted every three years in most participating countries, except in the case of Italy, where the survey is conducted at intervals of two years and possibly of Germany, where the frequency of the survey is still to be decided. Data for the next wave of the survey will be collected in the second half of 2013 and in 2014. The report for the second wave is expected to be released in 2016. It should be noted that the process of imputing, validating and analysing the data is highly complex and time-consuming.

Why did it take so long to release the data?

The delay between the collection of the data and the release of the Eurosystem report was unavoidable and due to several factors. First, all data had to be checked for plausibility, and were then validated using external sources. Second, whenever a household did not provide an answer to a question relating to an item on its balance sheet, the data were “imputed”, i.e. five imputed values (replicates) were provided for each missing value so as to provide an idea of the uncertainty of the imputed values. The relevant figures in the report are provided with measures of uncertainty that take into account the effect of such multiple imputations. Third, this was the first time that such an exercise was conducted in an internationally coordinated and harmonised fashion, which required substantial efforts to ensure the comparability of the data. All of these tasks are time-consuming, in particular for a survey with a highly complex design and a large sample size. Other similar surveys have comparable delays.

Are the underlying data (and, in particular, the country results) being made available?

A set of aggregate statistical tables, as well as the micro-data used for the HFCS and the associated documentation, are available for downloading from the HFCN webpage.

How is the survey financed? Does the ECB pay the cost?

The survey is carried out in a decentralised fashion. In each country, the costs of the survey are borne either by the competent NCB or by the national statistical institute involved.

How were the households selected in the survey? Is the sample representative?

In each country, household samples were designed to ensure representative results for both the euro area and the specific country involved. More than 62,000 households were surveyed in the first wave, with varying sample sizes across countries. The samples for some countries are relatively small, so that the country results need to be carefully analysed. In the published reports, a standard error is typically provided for indicators at the country level, and this takes into account both the number of households that responded and the range of possible outcomes (variability) for the variable being measured.

HFCS country surveys have a probabilistic sample design. This means that each household in the population has a non-zero probability of being part of the sample, which is defined before drawing the sample.

How do you ensure confidentiality?

The confidentiality of the household information is of utmost importance. The data are fully anonymised using state-of-the-art anonymisation techniques.

Is the participation of households in the survey compulsory?

No. Households are chosen randomly for the sample, and they are free to decide whether they wish to participate in the survey or not. Participation by households is controlled through statistical sampling techniques in order to ensure a sufficient number of interviews in each country.

What was the level of non-response (refusals to participate)? Did that proportion vary significantly across countries?

The average non-response rate was 52%, ranging from 31% (in France) to 81% (in Germany).

Do you have any insight into the cultural differences encountered when you talked about “wealth and money” with respondents, also with regard to providing “official (tax) bodies” with financial information? How could that have influenced the results?

Wealth is a sensitive issue and related surveys usually have to deal with higher non-response ratios than other household surveys, e.g. surveys on income or employment. However, according to the feedback provided by interviewers, once households had decided to participate in the survey they were very cooperative. Far more research is needed to allow assessments of possible country differences with respect to the potential for underreporting asset values.

What can you say about the confidence interval and inherent uncertainty regarding the results? Do these parameters differ across countries? Is it warranted to report results to only one decimal place, given the uncertainty surrounding the results?

The figures in the reports are estimates based on survey data. They are thus subject to sampling errors that result from inferences from the survey sample to the whole population. The standard errors, i.e. estimated measures of variations in such sampling errors, depend on the sample sizes, the particular way in which the sample is drawn and on the range of possible values for each particular variable. These differ across countries and across variables.

The estimates are provided to one decimal place (e.g. rounded to the nearest €100 and to 0.1%). Estimated standard errors are provided for most of the figures in the report, and in the accompanying statistical tables. This information provides a certain insight into the sampling uncertainty behind the figures and is worth checking before drawing conclusions, particularly when comparing data for countries with small national sample sizes.

In addition, sampling errors (non-participation in the survey that cannot be fully compensated for by the reweighting of the sample) as well as non-sampling errors (measurement, cognitive and memory issues/recall bias when questions are answered) need to borne in mind.

About the use of the survey

Can the survey provide some kind of approximation for the wealth of a country?

No. The survey was designed to allow the behaviour of individual private households to be studied. It was never intended to provide a substitute for the measurement of aggregate wealth available in macro statistics (e.g. the national accounts), and certainly not at the country level. The wealth of a country cannot and should not be assessed by measuring wealth of a single sector in isolation.

Mixing the “micro” approach with a “macro” analysis can lead to grave errors. Consider this example: taxes are transfers of wealth from (other) domestic sectors (largely from private households) to the general government. While the level of taxation has an effect on the level of private household wealth reflected in the survey data, the wealth of the country as a whole remains unchanged. Likewise, part of the wealth of households may be held in the form of liabilities of the public sector, e.g. holdings of bonds issued by the government. Government debt held by domestic households will be shown as positive household wealth in the survey data, while in terms of total net wealth of the country (for which domestic assets and liabilities should be consolidated) it is neutral, i.e. it has a zero net effect.

Along the same lines, the analysis of the whole economy should also take into account the net external position of a country vis-à-vis the rest of the world, i.e. what is known as the international investment position that is defined as the balance of a country’s external assets and liabilities.

What does “net wealth” mean?

Net wealth is defined as the difference between households’ total assets and their total liabilities, so that it may also be zero or a negative figure.

What measure of net wealth should one look at, the median or the mean?

Net wealth is very heterogeneous across households. Some households have very little wealth, while others are very wealthy. When summarising a very uneven distribution, different measures can be used, such as the mean or the median. Both the mean and the median are summary statistics of the wealth distribution. Both are thus useful, but each should be interpreted with caution, as they provide only a partial view of the entire distribution.

Mean net wealth simply takes the average of the net wealth of all households. In this respect, it needs to be borne in mind that an estimate of the mean is sensitive to outlying observations. Especially in the realm of wealth measurement where few individuals can have a high net wealth, the mean may not always be the most informative measure.

Median net wealth shows the middle value of the distribution, where 50% of the households hold less and 50% hold more net wealth.

How wealthy are euro area households?

The median and mean net wealth of euro area households are €109,000 and €231,000 respectively. The substantial difference between these two figures reflects the well-known fact that net wealth is distributed far more unevenly than many other economic variables, such as income or consumption.

How unevenly is household wealth distributed in the euro area?

The HFCS data estimates show that the top 10% of the wealthiest households account for 50% of total net wealth in the euro area. In the United States, this proportion is 74%.

What implications does an uneven distribution of wealth have for monetary policy? Does the transmission of monetary policy depend on the distribution of wealth in the economy?

The key goal of the ECB is to deliver price stability. For that purpose, it uses policy tools such as setting interest rates at a certain level. Changes in interest rates may well have different effects on various groups of households (as in the case of savers and borrowers, or in that of renters and home owners), and these groups may respond to such changes in different ways. To that extent, the transmission of monetary policy does depend on the financial situation of individual households. It is thus important for central banks to have an insight into the distribution of wealth in order to assess how their monetary policy is transmitted. However, wealth distribution is not an issue that can be addressed with the tools of monetary policy.

Does the dispersion of wealth in different countries reveal whether taxation has an impact, i.e. how do countries with relatively high taxes on wealth (property tax, overall wealth tax, high inheritance taxation) compare?

Taxation is one of many factors that affect the dispersion of wealth across countries. On the one hand, taxes can be used to redistribute wealth across households. At the same time, however, high taxation may also discourage the accumulation of wealth, or of certain types of wealth.

Are the results comparable across countries? If so, which factors explain such significant differences in net wealth across countries?

Household net wealth varies substantially across euro area countries, ranging from €51,000 to €398,000 in the case of the median, and from €80,000 to €710,000 in the case of the mean.

A great deal of work has gone into making figures comparable across the euro area. Nevertheless, cross-country differences should be interpreted with great caution.

There is little doubt that household characteristics, institutional factors and recent macroeconomic developments vary across countries. For example, in this survey, wealth is measured at the household level, but the average size of households differs from country to country. The magnitude of “public” wealth (including pensions, social housing and the provision of public services) varies across countries. The same holds true for rates of home and land ownership, and for household’s preferences with respect to holding real or financial assets. Most importantly, recent house price developments and the extent to which households take up loans to acquire property differ markedly across countries. In fact, this may have changed significantly further since 2010 when the survey fieldwork was conducted in most of the countries. The survey provides an insight into these differences at the micro level of the economy.

Are the results comparable with the national accounts?

The results of the survey have been thoroughly validated and are fairly consistent with information from other sources, including the national accounts. Nonetheless, the survey focuses on the provision of distributional information – its results are not, therefore, a substitute for the national accounts, which focus on the provision of aggregates for wealth, assets and liabilities.

The results for Cyprus

Why is household wealth so high in Cyprus?

In Cyprus, private households’ mean net wealth is estimated at €671.000, while their median net wealth is given as €267.000. Compared with the data for the euro area, the survey data for Cyprus are “outliers” in several respects (e.g. the household’s main residence, other property, self-employment businesses, etc. – see the more detailed explanations below). Validation checks using both public and non-public information did not, however, reveal any evident errors. The structure of real assets owned by households in Cyprus is very different from that in other countries. First, households in Cyprus own real assets far more often than those in other countries: there, the proportion of households owning property other than the main residence is the highest in the euro area (52%), and the aggregate value of such other property is even higher than the aggregate value of the household’s main residence. Actually, the main residence accounts for only 36% of households’ total real wealth in Cyprus (compared with between 52% and 83% in other countries). The proportion of households with self-employment businesses is also higher than in any other country (20%). This indicates that a large proportion of households in Cyprus own more than one type of real assets. The high ownership rates drive both the median and the mean net wealth up.

This, together with the huge increase in the stock of residential property (+30% over the last ten years, according to the census of 2011), and in property prices, has a major impact on the position of Cyprus vis-à-vis other countries.

The mean value of the household’s main residence in Cyprus is €318.000, well above the euro area average of € 217,000, but comparable to that given by other internally available information sources. The high housing value is affected by the large size of the main residences in Cyprus (the average size there is 156 m2, compared with a euro area average of 97 m2).

Most of the property owned by households in Cyprus, other than the household’s main residence, is accounted for by building plots, other land and secondary residences. Although a secondary residence in Cyprus is usually smaller than the household’s main residence, it usually includes a large plot of land.

Self-employment businesses owned by private households also constitute an outlier in comparison with other countries (the mean value is around €817,000, i.e. more than three times higher than the euro area mean). The data were collected (i.e. not imputed) and, although there are several significant outliers, the collected data also included a number of other high-value businesses.

It may also be important to bear in mind that the fieldwork in Cyprus was carried out in 2010, i.e. in a year when property prices were still quite high as a consequence of the construction sector boom. Since then, a substantial correction of property prices has taken place, with some further correction likely to occur in the near future.

Private households in Cyprus also have more members than those in most euro area countries (on average, 2.76 persons per household, compared with 2.04 in Germany). Viewed in per capita terms, the differences in net wealth across countries are somewhat lower than those seen when the net wealth is expressed per household.

Finally, inheritances and gifts are very common in Cyprus, as shown by the HFCS results: 39% of the households have received a substantial inheritance or gift (this share is the highest recorded in all participating countries). This has an impact on the proportion of households owning other property and/or self-employment businesses, which – together with high conditional mean values – leads to very high aggregate values of both types of assets.

What implications do the results of the survey have for the bailout of Cyprus?

The answer is none. The survey fieldwork in Cyprus was carried out in 2010 when macroeconomic and financial conditions were very different from those seen today. Asset prices were also very different. Future micro-level analysis based on the survey data should provide information on the structural and institutional characteristics that may be influencing households’ portfolios. Trying to draw macro-level and financial policy conclusions on Cyprus on the basis of the survey data would, at best, be speculative.

Does the survey cover deposits held by non-residents in Cyprus? Were foreign nationals included in the sample?

The survey covers only assets held by Cyprus residents. These comprise both financial assets and property in Cyprus and abroad. Non-residents in Cyprus are not covered by the survey.

To the extent that foreign nationals reside in Cyprus (i.e. have their main residence there and live there for most of the year), the probability of their being included in the sample is the same as that of other residents. For further details, please see the explanations provided in answer to a question "What is the coverage of the sample in terms of households and with respect to assets and liabilities?" above.

The results for Germany

Why is mean/median wealth in Germany so low?

Mean net wealth of private households in Germany is estimated at €195,000, while the median net wealth is given as €51,000. Cross-country differences in the net wealth of private households are caused by a complex interplay of many factors. A complete explanation of the low level of net wealth of private households in Germany would require an in-depth study that would need also to take into account social security systems, taxation, inheritance and other elements. However, three factors can immediately be identified that play a major role: household size (40% single-person households in Germany, compared with 32% for the euro area), home ownership rates (44% versus 60% for the euro area) and house prices (lower in Germany than in most other euro area countries).

In addition, the German re-unification and the depressed values of housing in eastern Germany also contribute to the relatively low figure given for mean net wealth (and to lesser extent for median net wealth). According to comparisons undertaken by the Deutsche Bundesbank on the basis of public information available before the release of the HFCS, mean net wealth of private households in western Germany is €230,000, compared with €233,000 in France, €291,000 in Spain and €275,000 in Italy.

The relative position of German private households in terms of net wealth coincides with evidence revealed earlier by similar surveys, e.g. the Survey on Health, Ageing and Retirement in Europe (SHARE). SHARE is the only other harmonised cross-country survey in Europe that provides extensive information on households’ balance sheet items, although only for respondents aged 50 or older.

Compared with existing survey data containing information on households’ balance sheets in Germany (the results of the Einkommens- und Verbrauchsstichproben (EVS) and the Sozio-oekonomische Panel (SOEP)) the most recent SOEP estimate (2007) of mean net wealth for individuals aged 17+ is €88,000, while the corresponding HFCS figure is €114,000. The coherence of distributional indicators to previous surveys is also good. For example, the share of net wealth held by the top decile is 59% in the HFCS, 57% in SOEP (2007) and 53% in EVS (2008). Comparisons between age groups also show consistent results.

Is household wealth distributed more unevenly in Germany than in other countries and, if so, why?

There is a significant difference between median and mean wealth in Germany (€51,000 and €195,000 respectively). This may be due to the fact that (unlike the situation in other euro area countries) the median household in Germany is not the owner of its main residence. In addition, the data for the median German household reveal significantly higher saving ratios for home owners with a mortgage than for other households.