4.2 Comparison of SoFIE and aggregate data from the RBNZ

Table 4 summarises the estimates of total household assets and liabilities from SoFIE and compares these to the aggregate estimates from the RBNZ. All population estimates from SoFIE have been inferred by applying the sampling weights provided by Statistics New Zealand and relate to the year ended September 2004.[12] The RBNZ data relates to calendar years and, for comparison purposes, we have estimated a September year by adding three-quarters of the 2004 estimate to one-quarter of the 2003 estimate.

There are some key differences between the coverage of the RBNZ data and the SoFIE data. As noted in Section 3.2, the RBNZ data excludes a range of assets that are covered by SoFIE. But on the other hand, the RBNZ data will include assets and liabilities held by non-residents and individuals living in non-private dwellings.

SoFIE data appears to have systematically underestimated the level of assets and liabilities for the year ended September 2004. Total household debt estimated from SoFIE was considerably lower than household debt recorded in the RBNZ aggregate data; it fell between 17% and 29% below with 95% confidence. This was owing to the lower housing debt estimate from SoFIE, which was between 23% and 34% below the RBNZ estimate with 95% confidence. The value of housing assets was also lower in SoFIE (by about 20%) and, overall, SoFIE estimated between 12% and 22% less net housing wealth.

Property values reported in SoFIE were generally registered valuations,[13] some of which were a few years old. Given the rapid growth in house prices between 2000 and 2004, there is reason to expect that the valuations will tend to underestimate market value for the year ended September 2004. For this reason, reported property values were adjusted using Territorial Local Authority indices obtained from Quotable Value New Zealand (QVNZ0, which take into account sales over the relevant period.[14] The RBNZ estimate of the value of property assets held by households is derived by RBNZ, also using QVNZ data.[15] The component of the difference between the SoFIE and RBNZ estimates of the total value of property assets that is owing to measurement is therefore likely to be small.

Therefore, the underestimate of property assets will be partly owing to differences in coverage. In particular, the treatment of assets and liabilities held in family trusts will be particularly important for property. The total value of residential property in family trusts and mortgages on these properties will be included in the RBNZ estimates of property assets and liabilities held by households, but not in the SoFIE estimates of property assets and liabilities.[16] Similarly, SoFIE does not include property assets owned, and mortgages owed, by non-residents, but estimates of these items are included in the aggregate data. Overseas property held by New Zealand residents is covered by SoFIE, but not included in the RBNZ aggregates; however, the total value of these properties is relatively small.[17] These factors suggest that we would expect the SoFIE estimates of property assets and mortgages to be below the RBNZ estimates.

As SoFIE tends to underestimate assets more broadly (eg, non-housing assets are underestimated by about 30%), it is probable that non-response bias is playing a role. It is possible that high net worth households have been underrepresented in SoFIE (perhaps they are harder to track down), but in the absence of administrative data on household wealth, it is not possible to confirm this.

These factors may affect our analysis of household debt and debt servicing costs. To the extent that debt not covered by SoFIE impacts on households (eg, mortgages on properties in family trusts would fall to households in most cases[18]), then debt levels and debt servicing ratios may be underestimated. It is also conceivable that the characteristics of households that are responsible for mortgages on properties in family trusts differ from those that are not. If this is the case, then our models that attempt to explain variation in debt levels and debt servicing relative to income may give biased estimates of the coefficients.

The effect of non-response bias on debt and debt servicing ratios is a little more difficult to understand as it depends on how well Statistics New Zealand's calibration has been able to adjust for this. If those who don't respond tend to have higher (or lower) debt levels than those who do with the same observable characteristics[19], then calibration is unlikely to have corrected for the bias in average debt levels, despite Statistics New Zealand's non-response adjustment. Overall, it seems more likely that our estimates of average debt and debt servicing ratios are underestimates than overestimates; but whether this affects the number at the extreme end of the distribution with “problem” debt is difficult to say.

¹ RBNZ data is for calendar years. Converted to September year by taking 1/4 of 2003 and 3/4 of 2004.

² Reported property values (generally registered valuations) were adjusted using Territorial Local Authority indices from QVNZ.

³ The business assets category includes farms, orchards and commercial property such as a factory or shop.

⁴ Durables consist of motor vehicles, leisure equipment, household items and miscellaneous assets such as art.

⁵ Excluding the SoFIE categories of Business & Durables.

Sources: SoFIE wave 2, Statistics New Zealand; RBNZ

We turn now to the distribution of debt by major categories. Tables 5 and 6 break the total value of debt into mortgages, student loans, bank and credit card debt, and other debt. The proportion each type contributes to the value of total debt is shown for each age group. Overall, mortgage debt contributed 69% to total debt held by non-partnered individuals and 82% of total debt held by couples in the year ended September 2004. The percentage varies by age group but, with the exception of young singles where 60% of debt is estimated to have been student loans, mortgages represented the majority of all debt.

Sources: SoFIE wave 2, Statistics New Zealand

For the 65+ group, although the proportion of debt that was bank, credit card and other debt appears to have been relatively high for both non-partnered individuals and couples, the average amounts held were relatively low. The high proportions of these categories reflect the relatively low mortgage debt and student debt in this age group.