Household Portfolios in Turkey: Results from Household Finance and Consumption Survey *

Abstract

Abstract This paper analyzes the distribution of household portfolios in Turkey using a fresh data set, the Central Bank of the Republic of Turkey – Household Finance and Consumption Survey (CBRT-HFCS), which closes an important data gap by providing detailed data on households’ financial assets and liabilities. The empirical analysis concentrates on the motives behind household saving preferences and the distribution of household portfolios to financial instruments i.e. Turkish Lira and foreign currency denominated assets, gold, stocks and Individual Retirement Insurance funds. Moreover, the financial situation of households in Turkey is compared with selected European countries. We find that real assets and specifically housing wealth represents a larger share of total assets compared to financial assets in Turkey with respect to the Euro area. Another important finding is that the fraction of indebted households is higher, while households’ ability to save is significantly lower in Turkey. It is striking that the possibility of saving remains low even in the upper quintiles of household net wealth and income. Finally, the percentage of households with mortgage debt and the share of mortgage debt in total household liabilities are smaller in Turkey, suggesting that many households have to rely on their own funds or private loans to purchase homes. We can argue that households need to be encouraged to invest a larger share of their wealth in financial assets to raise household savings and to deepen financial markets in Turkey. JEL Classification: C21, D12, D14, D31