Wealth, Income and Debt of European Households

This article is based on the ECB report "Household Finance and Consumption Survey: Results from the 2023 wave" and summarises facts from the 2023 survey of around 90,000 households in 20 euro area countries, plus the Czech Republic and Hungary. The study compares 2023 with 2021, adjusting the values for inflation to show real changes. This is important because between 2021 and 2023 the price level in the euro area increased by 14.1%.

Assets Held

Between 2021 and 2023 there was an increase in the share of households that own other real estate, vehicles, mutual funds and other financial assets. The share of households owning their main residence decreased, with the drop more pronounced among younger households where the reference person is under 45 and among households in the lowest group by net wealth. The inflation-adjusted value of total assets held by households in the euro area fell between 2021 and 2023, decreasing to €172,200. This decline is more marked for households where the reference person is under 35, is part of the economically active population, and for households in the lowest income group. The fall in the value of the main residence is also widespread, although some household groups experienced slight increases in value. In contrast, despite the decline, many households increased their deposit holdings.

Editor's conclusions (not part of the report, but the author's opinion):

• Households slightly increase real estate holdings and investments in financial assets, but the pace is weak.
• The number of people owning their own home is declining.
• The value of assets of people under 35 is falling.
• Deposits are increasing.
• Overall, it is becoming harder for young people to build up assets and own property; therefore, the need for financial literacy and starting to invest in real estate (RE) and financial assets (FA) from an early age is growing.

Debt

Households in the euro area are reducing their liabilities across different components of debt; there is a decline in the share of indebted households. The share of indebted households falls from 42.5% in 2021 to 41.5% in 2023. There are noticeable decreases in inflation-adjusted conditional medians of mortgage debt for the main residence. The debt burden of households tends to decline, as real house values and incomes fall less than debt. Overall, in 2023 debt-burden indicators point to a moderate risk of financial fragility mainly for households in the lowest group by net wealth – with a "debt-to-assets" ratio close to 100% and a "mortgage payment-to-income" ratio of 21.1%.

Editor's conclusions (not part of the report, but the author's opinion):

• Household debt decreases, with the main reason being higher inflation.
• In this way, property values rise while mortgage debt falls, and the debt-to-property ratio moves in favour of borrowers.
• In practice, those who have invested in property via mortgage credit have increased their wealth, i.e. the need for financial literacy and early investing in RE and FA is growing.

Net Wealth

The level and distribution of net wealth remain relatively stable. While net wealth in the euro area increases slightly, reaching €140,100 for the median household, these differing dynamics are mainly due to the fact that debt – which is more concentrated than assets in the lower parts of the net-wealth distribution – decreases more than assets. Accordingly, substantial increases in net wealth are observed among younger and middle-aged households, mortgagors and households in the lower parts of the net-wealth distribution, while net wealth declines for older households, owners without debt and households in the highest group of the net-wealth distribution.

Editor's conclusions (not part of the report, but the author's opinion): see the conclusions above.

Income

Between 2021 and 2023 inflation-adjusted gross household income declines by 3.4%, reaching €37,100. Income drops are more pronounced in the lower and middle parts of the income distribution. Increases are recorded in the top 10% and in the incomes of the self-employed. Overall, income inequality in the euro area rises markedly. The share of the highest income group also increases.

Editor's conclusions (not part of the report, but the author's opinion):

• The average level of household income is not high – around €3,000 gross per month.
• Income inequality is increasing – the rich are getting richer.