Household Vulnerability in Austria – A Microeconomic Analysis based on the Household Finance and consumption survey

57 As we have seen at the beginning of the Great Recession, the household sector of an economy played a central role in the financial (in)stability that developed after the bust of the housing bubble in the U.S.A. (see e.g. Acharya et al., 2009; Claessens et al., 2010). Debelle (2004) had already pointed out that it is the distribution of debt that needs to be analyzed to investigate the effects on the macroeconomy. Aggregate data on the level of debt, income and wealth do not provide sufficient information to analyze exhaustively the vulnerability of households and, hence, the potential risk to the financial sector. This information has to be supplemented with findings on the distribution of debt and the identification of potentially vulnerable households. The Household Finance and Consumption Survey (HFCS) is the first source to provide in-depth information including both the liability and asset side of households’ balance sheets in Austria. On the asset side, recent housing price dynamics show relatively strong increases in housing prices in Austria – especially since mid-2010 – compared to other European countries (see OeNB, 2013). On the liability side, the aggregate debt burden (both mortgage and nonmortgage liabilities) in Austria has been modest compared to the euro area (see OeNB, 2012). Over the last ten years consumer credit relative to disposable national income has actually decreased while loans for house purchases have increased substantially.1 The study at hand provides a deeper investigation of the various groups holding debt and estimates the exposure of banks to potentially vulnerable households. Drawing on the methods applied in the literature, we describe first the characteristics of the median debt holder before identifying potentially vulnerable households and the risk they pose to the financial sector. In other words, we look at household vulnerability from the perspective of the banking sector and not from the perspective of the household itself.