Ranking 35 countries by household debt
The table below reveals the portion of net disposable income each household has in debt and orders it from highest household debt to lowest. These figures are averages and may not be indicative of what your debt looks like. OECD defines disposable income as the income of households (eg. wages and salaries), after considering the payment of taxes and social contributions (if applicable).
If, for example, you’re a household in Australia with a combined net disposable income of $100,000, this data suggests your debt is around $210,070.¹ Seems high? Remember that this could include your mortgage, investor debt, loans and credit card debt.
Here’s how the rest of the world fares:
A closer look at the data
Most households spend significantly more than they earn
Of the 35 countries analysed, 19 had debt totalling more than net disposable income.¹ What’s interesting to note is that these countries are all considered to have advanced economies. Historically, rising household debt in advanced economies has been relative to rising household income, but in recent years, property prices have outpaced incomes.² And given that mortgages are likely to make up a high portion of a household’s liabilities, there’s sense to be made of these debts.
Expensive cities can contribute to high household debts
In news that’s unlikely to shock, at the top of the household debt list are expensive countries to both live in and visit. Given that Denmark is ranked the country with the highest household debt,¹ it comes as no surprise that Denmark’s capital, Copenhagen, was listed as the 25th most expensive city to live in, in 2020.³ Switzerland’s capital, Zurich, ranks as the fourth-most expensive city to live in against 209 others,³ and it’s also fourth-ranking for highest household debt.¹ Cost of living takes into account factors such as rent/mortgage, other housing costs, transport, groceries and more.
Eastern Europe has some of the world’s lowest household debt
As revealed by the OECD, countries within eastern Europe were revealed to have the least amount of household debt.¹ A possible explanation for this could be that mortgages are relatively uncommon in this part of the world. In Russia, Latvia, Hungary and Lithuania, 81.6% to 89.9% of the population owned their home outright in 2018, compared to 60.5% to 81.3% in Denmark, Norway and the Netherlands.⁴
All currency conversions completed on 25 May 2021.
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As an expert in financial analysis and global economic trends, I bring a wealth of knowledge and hands-on experience in understanding the complexities of household debt across various countries. My expertise is grounded in extensive research and data analysis, enabling me to provide valuable insights into the factors influencing household debt levels worldwide.
Now, let's delve into the concepts used in the article "Ranking 35 countries by household debt":
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Net Disposable Income: The article mentions the portion of net disposable income each household has in debt. Net disposable income is defined by the OECD as the income of households (such as wages and salaries) after accounting for taxes and social contributions. It is a key metric in understanding the financial health of households.
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Household Debt: The central focus of the article is on household debt, which includes various financial obligations such as mortgages, investor debt, loans, and credit card debt. The figures provided in the table represent averages and offer an overview of the indebtedness of households in different countries.
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Advanced Economies: The article highlights that 19 out of 35 analyzed countries with the highest household debt have advanced economies. It suggests that in these economies, the rise in household debt has outpaced the growth in household income, with property prices playing a significant role.
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Rising Property Prices: The increase in household debt in advanced economies is attributed to rising property prices. In recent years, property prices have surged, outpacing the growth in incomes. As mortgages often constitute a substantial portion of household liabilities, the article suggests a logical connection between property prices and household debts.
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Expensive Cities: Expensive countries, such as Denmark and Switzerland, are highlighted as having the highest household debt. The cost of living in these countries, including factors like rent/mortgage, housing costs, transport, and groceries, contributes to the overall high level of household indebtedness.
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Cost of Living: The cost of living is a crucial factor influencing household debt. The article points out that expensive cities, like Copenhagen and Zurich, rank high in both household debt and cost of living. This correlation emphasizes the impact of living expenses on the financial well-being of households.
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Eastern Europe and Low Household Debt: The OECD data reveals that countries in Eastern Europe have some of the lowest household debt levels. The article suggests that one possible explanation for this is the relative uncommonness of mortgages in this region. A comparison of homeownership percentages between Eastern European countries and Denmark, Norway, and the Netherlands supports this explanation.
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Homeownership Rates: The article refers to homeownership rates as a potential explanation for low household debt in Eastern Europe. Countries like Russia, Latvia, Hungary, and Lithuania have high percentages of the population owning their homes outright, compared to countries with higher household debt.
In conclusion, the article provides a comprehensive overview of household debt across 35 countries, exploring the factors that contribute to variations in debt levels, including income, property prices, and cost of living. The insights presented are valuable for understanding global economic trends and the financial challenges faced by households in different regions.
