IDEAS home Printed from https://ideas.repec.org/p/nzt/nztwps/07-04.html
   My bibliography  Save this paper

Housing in the Household Portfolio and Implications for Retirement Saving: Some Initial Finding from SOFIE

Author

Abstract

Housing is an important sector of the economy. It has widespread implications for investment, banking, saving and employment. Home ownership has been linked to building social capital and a sense of community. Furthermore housing equity is a significant element of retirement accumulation for many New Zealanders. The Treasury maintains a programme of work related to housing, saving, wealth accumulation and retirement. The results of this contribute to Treasury's role in providing advice to the Minister and at the same time informing a wider group of external stakeholders. This paper uses unit record data from a new panel survey (SOFIE) to study housing wealth in household portfolios. It then estimates the rates of saving that would be needed to smooth consumption between pre- and post-retirement. Finally it explores the effect of some home equity withdrawal on the required saving rates. The main findings of this study are: • 60% of households are recorded as owning a home; • Almost half of home-owning households have no mortgage debt; • One in six households own residential investment property; • One in twelve households own a rental property; • Patterns of property ownership in New Zealand are similar to those in selected comparator countries; • Housing represents a major share of household wealth, and this share has risen in line with the increase in house prices; • The composition of household portfolios is comparable to other selected countries except for the USA ; • Empirical results indicate that even if households planned to draw down half of housing equity to support retirement income, the impact on the saving rate needed to smooth consumption would be modest.

Suggested Citation

  • Grant Scobie & Trinh Le & John Gibson, 2007. "Housing in the Household Portfolio and Implications for Retirement Saving: Some Initial Finding from SOFIE," Treasury Working Paper Series 07/04, New Zealand Treasury.
  • Handle: RePEc:nzt:nztwps:07/04
    as

    Download full text from publisher

    File URL: https://treasury.govt.nz/sites/default/files/2007-09/twp07-04.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Trinh Le & Grant Scobie & John Gibson, 2009. "Are Kiwis saving enough for retirement? Evidence from SOFIE," New Zealand Economic Papers, Taylor & Francis Journals, vol. 43(1), pages 3-19.
    2. James F. Moore & Olivia S. Mitchell, 1997. "Projected Retirement Wealth and Savings Adequacy in the Health and Retirement Study," NBER Working Papers 6240, National Bureau of Economic Research, Inc.
    3. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
    4. James Banks & Richard Blundell & James P. Smith, 2002. "Wealth Portfolios in the UK and the US," NBER Working Papers 9128, National Bureau of Economic Research, Inc.
    5. Katherine Henderson & Grant M. Scobie, 2009. "Household Debt in New Zealand," Treasury Working Paper Series 09/03, New Zealand Treasury.
    6. Mark van Zijll de Jong & Grant M. Scobie, 2006. "Housing: An Analysis of Ownership and Investment Based on the Household Savings Survey," Treasury Working Paper Series 06/07, New Zealand Treasury.
    7. John Gibson & Grant Scobie, 2001. "A cohort analysis of household income, consumption and saving," New Zealand Economic Papers, Taylor & Francis Journals, vol. 35(2), pages 196-216.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Le, Trinh, 2007. "Does New Zealand have a household saving crisis?," NZIER Working Paper 2007/1, New Zealand Institute of Economic Research.
    2. David R. Baqaee, 2009. "Sharing a Risky Cake," Working Papers in Economics 09/20, University of Canterbury, Department of Economics and Finance.
    3. David Baqaee, 2010. "Intertemporal Choice: A Nash Bargaining Approach," Reserve Bank of New Zealand Discussion Paper Series DP2010/08, Reserve Bank of New Zealand.
    4. Janice Burns & Maire Dwyer, 2007. "Households'attitudes to savings, investment and wealth," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, December.
    5. Aaron Drew & Rishab Sethi, 2007. "The transmission mechanism of New Zealand monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, June.
    6. David Law & Lisa Meehan, 2013. "Housing Affordability in New Zealand: Evidence from Household Surveys," Treasury Working Paper Series 13/14, New Zealand Treasury.
    7. Richard Fabling & Lynda Sanderson, 2010. "Exporting and performance: Market entry, expansion and destination characteristics," Reserve Bank of New Zealand Discussion Paper Series DP2010/07, Reserve Bank of New Zealand.
    8. Emma Gorman & Grant M Scobie & Yongjoon Paek, 2013. "Measuring Saving Rates in New Zealand: An Update," Treasury Working Paper Series 13/04, New Zealand Treasury.
    9. Mark Smith, 2010. "Evaluating household expenditures and their relationship with house prices at the microeconomic level," Reserve Bank of New Zealand Discussion Paper Series DP2010/01, Reserve Bank of New Zealand.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Grant M. Scobie & Katherine Henderson, 2009. "Saving Rates of New Zealanders: A Net Wealth Approach," Treasury Working Paper Series 09/04, New Zealand Treasury.
    2. Trinh Le & John Gibson & Steven Stillman, 2010. "Household Wealth and Saving in New Zealand: Evidence from the Longitudinal Survey of Family, Income and Employment," Working Papers 10_06, Motu Economic and Public Policy Research.
    3. Le, Trinh, 2007. "Does New Zealand have a household saving crisis?," NZIER Working Paper 2007/1, New Zealand Institute of Economic Research.
    4. Andrew Benito, 2007. "Housing equity as a buffer: evidence from UK households," Bank of England working papers 324, Bank of England.
    5. Kyle Herkenhoff & Lee Ohanian, 2019. "The Impact of Foreclosure Delay on U.S. Employment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 63-83, January.
    6. Michael F. Lovenheim & Kevin J. Mumford, 2010. "Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust," Purdue University Economics Working Papers 1228, Purdue University, Department of Economics.
    7. Anil Kumar, 2018. "Do Restrictions on Home Equity Extraction Contribute to Lower Mortgage Defaults? Evidence from a Policy Discontinuity at the Texas Border," American Economic Journal: Economic Policy, American Economic Association, vol. 10(1), pages 268-297, February.
    8. Ashley Dunstan & Hayden Skilling, 2015. "Commercial property and financial stability," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 78, pages 1-10, March.
    9. Albanesi, Stefania & DeGiorgi, Giacomo & Nosal, Jaromir, 2022. "Credit growth and the financial crisis: A new narrative," Journal of Monetary Economics, Elsevier, vol. 132(C), pages 118-139.
    10. Richard Disney & John Gathergood, 2018. "House Prices, Wealth Effects and Labour Supply," Economica, London School of Economics and Political Science, vol. 85(339), pages 449-478, July.
    11. John Simon & Tahlee Stone, 2017. "The Property Ladder after the Financial Crisis: The First Step is a Stretch but Those Who Make It Are Doing OK," RBA Research Discussion Papers rdp2017-05, Reserve Bank of Australia.
    12. Galina Hale & John Krainer & Erin McCarthy, 2020. "Aggregation Level in Stress-Testing Models," International Journal of Central Banking, International Journal of Central Banking, vol. 16(4), pages 1-46, September.
    13. David Law & Grant M. Scobie, 2018. "KiwiSaver and the accumulation of net wealth," New Zealand Economic Papers, Taylor & Francis Journals, vol. 52(1), pages 1-20, January.
    14. Shiller, Robert J., 1999. "Social security and institutions for intergenerational, intragenerational, and international risk-sharing," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 165-204, June.
    15. Xiaoqing Zhou, 2018. "Home Equity Extraction and the Boom-Bust Cycle in Consumption and Residential Investment," Staff Working Papers 18-6, Bank of Canada.
    16. Patrick Bajari & Phoebe Chan & Dirk Krueger & Daniel Miller, 2013. "A Dynamic Model Of Housing Demand: Estimation And Policy Implications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 409-442, May.
    17. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 255-296, March.
    18. Samuel Dodini & Donald R. Haurin & Stephanie Moulton & Maximilian D. Schmeiser, 2015. "How House Price Dynamics and Credit Constraints affect the Equity Extraction of Senior Homeowners," Finance and Economics Discussion Series 2015-70, Board of Governors of the Federal Reserve System (U.S.).
    19. Atalay, Kadir & Edwards, Rebecca, 2022. "House prices, housing wealth and financial well-being," Journal of Urban Economics, Elsevier, vol. 129(C).
    20. Virgiliu Midrigan & Denis Gorea, 2017. "Liquidity Constraints in the U.S. Housing Market," 2017 Meeting Papers 802, Society for Economic Dynamics.

    More about this item

    Keywords

    Consumption smoothing; home equity; household portfolio; household wealth; housing; life cycle; retirement; savings;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nzt:nztwps:07/04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CSS Web and Publishing, The Treasury (email available below). General contact details of provider: https://edirc.repec.org/data/tregvnz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.