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Factors Influencing Housing Equity Withdrawal: Evidence from a Microeconomic Survey

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  • CARL SCHWARTZ
  • CHRISTINE LEWIS
  • DAVID NORMAN
  • TIM HAMPTON
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    Abstract

    The increase in housing equity withdrawal and coincident decline in aggregate savings rates in a number of countries in recent years is consistent with the consumption-smoothing model of housing equity withdrawal. However, there are a variety of other theoretical models that purport to explain why households withdraw and inject equity. To assess the relative importance of these various theories, we use a comprehensive survey of the equity withdrawal and injection decisions of Australian households. We find support for several theories. Life cycle considerations appear to be most important, with older households accounting for the bulk of equity withdrawn. Portfolio rebalancing considerations also appear important, with financial asset accumulation the primary use of withdrawn funds. Consumption-smoothing motives play an influential role, although primarily for smaller-value transactions. Copyright © 2008 The Economic Society of Australia.

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    Bibliographic Info

    Article provided by The Economic Society of Australia in its journal Economic Record.

    Volume (Year): 84 (2008)
    Issue (Month): 267 (December)
    Pages: 421-433

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    Handle: RePEc:bla:ecorec:v:84:y:2008:i:267:p:421-433

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    Cited by:
    1. David M. Williams, 2010. "Consumption, wealth and credit liberalisation in Australia," Economics Series Working Papers 492, University of Oxford, Department of Economics.
    2. Fisher, Lance A. & Otto, Glenn & Voss, Graham M., 2010. "The response of Australian consumption to housing wealth," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 284-299, March.
    3. Muellbauer, John & Williams, David M, 2011. "Credit Conditions and the Real Economy: The Elephant in the Room," CEPR Discussion Papers 8386, C.E.P.R. Discussion Papers.
    4. Ebner, André, 2010. "A micro view on home equity withdrawal and its determinants. Evidence from Dutch households," Discussion Papers in Economics 11309, University of Munich, Department of Economics.
    5. Viola Angelini & Peter Simmons, . "Housing Debt and Consumption," Discussion Papers 11/20, Department of Economics, University of York.
    6. Atalay, Kadir & Whelan, Stephen & Yates, Judith, 2013. "Housing Wealth and Household Consumption: New Evidence from Australia and Canada," Working Papers 2013-04, University of Sydney, School of Economics.

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