Saturday, November 10, 2012

The Household Sector Financial Balance Sheet

Here is a summary of the 2011 financial balance sheet of the household sector from last week’s Institutional Sector Accounts.

Household Balance Sheet 2011

The numbers are little changed from 2010 when a net financial wealth of €118 billion was reported.  The main reason for the slight increase in net financial wealth is the continued reduction in household loan liabilities.  The total wealth of the household sector would need non-financial assets (property, land and valuables) added to this €117 billion figure.  The value of houses owned by the household sector is probably around €300 billion.

One notable feature of the balance sheet of the household sector is the declining level of loan liabilities.  According to the CSO data, this peaked at €203 billion in 2008.  Since then it has fallen by €24 billion.

Household Loan Liabilities

The fall in short-term loans may hit a lower bound but the drop and long-term loan liabilities has averaged around €6 billion per year and if current repayment and drawdown patterns remain this is likely to continue.

There is massive debt in the household sector in Ireland but it is clear that there are massive repayments being made.  The reduction to €179 billion is significant but the end-2006 figure was €169 billion so the progress in unwinding the huge borrowing of the boom is still small.  The 2002 figure was €110 billion.

Reductions in household gross disposable income means that the drops in the level of debt are not reflected in drops in the key debt-to-disposable income metric for the household sector.  This is reflected in this chart from the CSO.

Household Debt to Income

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