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Unlocking housing equity in Japan

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  • Mitchell, Olivia S.
  • Piggott, John

Abstract

Prior literature on asset patterns among the elderly often overlooks housing wealth as a determinant of retiree wealth, particularly in the Japanese context. Yet releasing equity in housing may be a natural mechanism to boost consumption, reduce public pension liability, and mitigate the demand for long-term care facilities in Japan. Our study evaluates what might be needed to implement reverse mortgages (RMs) in this country. Policies could include exempting RMs from capital gains tax and transactions tax, along with mechanisms to make annuity income flows nontaxable, along with interest rate accruals for RMs. In addition, housing market reforms to enhance information flows would be needed, particularly regarding new and existing housing trades, which could permit the securitization of housing loans and lines of credit. Other improvements in capital markets could also help, including the establishment of reinsurance mechanisms to help lenders offer these reverse mortgages while having some protection against crossover risk. In the Japanese case, demand for RMs will be dampened by declining residential housing values as well as low interest rates and long life expectancies. Nevertheless, we conclude that RMs might be a good way to finance elderly consumption in Japan, particularly against the backdrop of governmental financial stringencies.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 18 (2004)
Issue (Month): 4 (December)
Pages: 466-505

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Handle: RePEc:eee:jjieco:v:18:y:2004:i:4:p:466-505

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Web page: http://www.elsevier.com/locate/inca/622903

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References

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Citations

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Cited by:
  1. Joan Costa i Font & Joan Gil & Oscar Mascarilla Miró, . "Preferencias de la población ante la financiación de la dependéncia: La hipoteca inversa en España," Studies on the Spanish Economy, FEDEA 230, FEDEA.
  2. Olivia S. Mitchell & John Piggott & Michael Sherris & Shaun Yow, 2006. "Financial Innovation for an Aging World," NBER Working Papers 12444, National Bureau of Economic Research, Inc.
  3. Ngee-Choon Chia & Albert K C Tsui, 2005. "Reverse Mortgages as Retirement Financing Instrument: An Option for “Asset-rich and Cash-poor” Singaporeans," SCAPE Policy Research Working Paper Series, National University of Singapore, Department of Economics, SCAPE 0503, National University of Singapore, Department of Economics, SCAPE.
  4. Chiuri, Maria Concetta & Jappelli, Tullio, 2008. "Do the elderly reduce housing equity? An international comparison," CFS Working Paper Series, Center for Financial Studies (CFS) 2008/20, Center for Financial Studies (CFS).
  5. Lee, Yung-Tsung & Wang, Chou-Wen & Huang, Hong-Chih, 2012. "On the valuation of reverse mortgages with regular tenure payments," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 430-441.
  6. Olivia S. Mitchell & John Piggott & Satoshi Shimizutani, 2004. "Aged-Care Support in Japan: Perspectives and Challenges," NBER Working Papers 10882, National Bureau of Economic Research, Inc.
  7. Ngee-Choon Chia & Albert K C Tsui, 2009. "Monetizing Housing Equity to Generate Retirement Incomes," Microeconomics Working Papers 22759, East Asian Bureau of Economic Research.
  8. Ming Pu & Gang-Zhi Fan & Yongheng Deng, 2014. "Breakeven Determination of Loan Limits for Reverse Mortgages under Information Asymmetry," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 48(3), pages 492-521, April.
  9. Ngee-Choon Chia & Albert K C Tsui, 2005. "Reverse Mortgages as Retirement Financing Instrument : An Option for “Asset-rich and Cash-poor†Singaporeans," Finance Working Papers 22566, East Asian Bureau of Economic Research.
  10. Elsa Fornero & Maria Cristina Rossi & Maria Cesira Urzì Brancati, 2011. "Explaining why, right or wrong, (Italian) households do not like reverse mortgages," CeRP Working Papers, Center for Research on Pensions and Welfare Policies, Turin (Italy) 123, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  11. Maier, Andreas, 2010. "Immobilienverzehrprodukte: Potenzielle Profiteure und Nachfragehemmnisse," Thuenen-Series of Applied Economic Theory, University of Rostock, Institute of Economics 115, University of Rostock, Institute of Economics.
  12. Marcelo Abi-Ramia Caetano & Daniel da Mata, 2009. "Hipoteca Reversa," Discussion Papers, Instituto de Pesquisa Econômica Aplicada - IPEA 1380, Instituto de Pesquisa Econômica Aplicada - IPEA.

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