IDEAS home Printed from https://ideas.repec.org/p/nzt/nztwps/06-07.html
   My bibliography  Save this paper

Housing: An Analysis of Ownership and Investment Based on the Household Savings Survey

Author

Listed:

Abstract

In 2001, Statistics New Zealand conducted a major survey of the assets and liabilities of New Zealanders called the Household Savings Survey (HSS). This paper presents the results of an analysis of ownership and investment in housing based on the results of that survey. International comparisons suggest that the rates of home ownership, investment in property and housing debt levels in New Zealand are broadly comparable with those in Australia and the United States and with a wider set of countries. An exception is that younger age groups in New Zealand hold more investment property than their counterparts in the USA and Australia. In New Zealand almost one in ten couples owned rental property in 2001, while one in five owned some form of investment property. We examine the factors that govern tenure choice and gearing. Of note is the fact that 44% of couples and 56% of individual home owners have debt free residential properties. Households' balance sheets reflect the importance of housing for both assets and liabilities. We complement the analysis of the cross-sectional unit record data from the HSS with an analysis of housing taken from the households' aggregate balance sheets from 1978 to 2004 from the Reserve Bank of New Zealand. We use these data to form a measure of household saving based on the stock of net equity. We then adjust this measure of savings for changes in house prices, and find that this adjustment explains almost two thirds of the difference between the stock and flow measure of household savings, the latter taken from the Household Income and Outlay Accounts. Furthermore we find that from 1980 to 2005 the annual average rate of household saving based on these estimates from household balance sheets was 12.4% of personal disposable income, after removing the effect of changes in house price. Arguably this is a preferable measure of household saving to the widely cited negative rates of household saving based on national income accounts. We further use the balance sheet data to estimate the extent to which households have apparently withdrawn equity from their housing assets for investment in other forms or consumption. We find that on average a rise of one dollar in housing net equity is associated with 10 cents of apparent equity withdrawal.

Suggested Citation

  • 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.
    • Handle: RePEc:nzt:nztwps:06/07
    as

    Download full text from publisher

    File URL: https://treasury.govt.nz/sites/default/files/2007-10/twp06-07.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Iris Claus & Grant Scobie, 2001. "Household Net Wealth: An International Comparison," Treasury Working Paper Series 01/19, New Zealand Treasury.
    2. Marion Kohler & Anthony Rossiter, 2005. "Property Owners in Australia: A Snapshot," RBA Research Discussion Papers rdp2005-03, Reserve Bank of Australia.
    3. Goodman, Allen C., 1988. "An econometric model of housing price, permanent income, tenure choice, and housing demand," Journal of Urban Economics, Elsevier, vol. 23(3), pages 327-353, May.
    4. Bourassa Steven C., 1995. "A Model of Housing Tenure Choice in Australia," Journal of Urban Economics, Elsevier, vol. 37(2), pages 161-175, March.
    5. Painter, Gary, 2000. "Tenure Choice with Sample Selection: Differences among Alternative Samples," Journal of Housing Economics, Elsevier, vol. 9(3), pages 197-213, September.
    6. Katherine Henderson & Grant M. Scobie, 2009. "Household Debt in New Zealand," Treasury Working Paper Series 09/03, New Zealand Treasury.
    7. Gary Painter, 2000. "Tenure Choice with Sample Selection: A Note on the Differences among Alternative Samples," Working Paper 8647, USC Lusk Center for Real Estate.
    8. Ioannides, Yannis M & Rosenthal, Stuart S, 1994. "Estimating the Consumption and Investment Demands for Housing and Their Effect on Housing Tenure Status," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 127-141, February.
    9. Khoon Goh, 2005. "Savings and the household balance sheet," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 68, June.
    10. Grant Scobie & John Gibson & Trinh Le, 2004. "Saving for Retirement: New Evidence for New Zealand," Treasury Working Paper Series 04/12, New Zealand Treasury.
    11. Leslie Hull, 2003. "Financial deregulation and household indebtedness," Reserve Bank of New Zealand Discussion Paper Series DP2003/01, Reserve Bank of New Zealand.
    12. Bourassa, Steven C, 2000. "Ethnicity, Endogeneity, and Housing Tenure Choice," The Journal of Real Estate Finance and Economics, Springer, vol. 20(3), pages 323-341, May.
    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. Cameron, Linda & Chapple, Bryan & Davis, Nick & Kousis , Artemisia & Lewis, Geoff, 2007. "New Zealand Financial Markets, Saving and Investment," Occasional Papers 07/5, Ministry of Economic Development, New Zealand.
    2. Le, Trinh, 2007. "Does New Zealand have a household saving crisis?," NZIER Working Paper 2007/1, New Zealand Institute of Economic Research.
    3. Andrew Coleman & Grant Scobie, 2009. "A Simple Model of Housing Rental and Ownership with Policy Simulations," Working Papers 09_08, Motu Economic and Public Policy Research.
    4. 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.
    5. 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.
    6. Grant M. Scobie & Katherine Henderson, 2009. "Saving Rates of New Zealanders: A Net Wealth Approach," Treasury Working Paper Series 09/04, New Zealand Treasury.
    7. 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. Josep Raya & Jaume Garcia, 2012. "Which Are the Real Determinants of Tenure? A Comparative Analysis of Different Models of the Tenure Choice of a House," Urban Studies, Urban Studies Journal Limited, vol. 49(16), pages 3645-3662, December.
    2. Justo Manrique & Kalu Ojah, 2003. "The demand for housing in Spain: an endogenous switching regression analysis," Applied Economics, Taylor & Francis Journals, vol. 35(3), pages 323-336.
    3. Lawrence W C Lai & Winky K O Ho, 2001. "Zone Separation: A Probit Analysis of Hong Kong Planning Application Statistics," Environment and Planning B, , vol. 28(6), pages 923-932, December.
    4. Lee, Kwan Ok & Painter, Gary, 2013. "What happens to household formation in a recession?," Journal of Urban Economics, Elsevier, vol. 76(C), pages 93-109.
    5. 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.
    6. Marion Kohler & Anthony Rossiter, 2005. "Property Owners in Australia: A Snapshot," RBA Research Discussion Papers rdp2005-03, Reserve Bank of Australia.
    7. Murtazashvili, Irina & Wooldridge, Jeffrey M., 2016. "A control function approach to estimating switching regression models with endogenous explanatory variables and endogenous switching," Journal of Econometrics, Elsevier, vol. 190(2), pages 252-266.
    8. Chyi Lin Lee, 2017. "An examination of the risk-return relation in the Australian housing market," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 10(3), pages 431-449, June.
    9. James Alm & Mikhail I. Melnik, 2005. "Sales Taxes and the Decision to Purchase Online," Public Finance Review, , vol. 33(2), pages 184-212, March.
    10. Gary Painter & Lihong Yang & Zhou Yu, 2001. "Heterogeneity in Asian American Homeownership: The Impact of Household Endowments and Immigrant Status," Working Paper 8630, USC Lusk Center for Real Estate.
    11. Swarnankur Chatterjee & Velma Zahirovic-Herbert, 2011. "Homeownership and Housing Equity: An Examination of Native- Immigrant Differences in Housing Wealth," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(2), pages 211-223, May.
    12. Lawrence W. C. Lai & Winky K. O. Ho, 2001. "A Probit Analysis of Development Control: A Hong Kong Case Study of Residential Zones," Urban Studies, Urban Studies Journal Limited, vol. 38(13), pages 2425-2437, December.
    13. Grant M. Scobie & Katherine Henderson, 2009. "Saving Rates of New Zealanders: A Net Wealth Approach," Treasury Working Paper Series 09/04, New Zealand Treasury.
    14. Painter, Gary & Gabriel, Stuart & Myers, Dowell, 2001. "Race, Immigrant Status, and Housing Tenure Choice," Journal of Urban Economics, Elsevier, vol. 49(1), pages 150-167, January.
    15. Dusansky, Richard & Koc, Cagatay, 2007. "The capital gains effect in the demand for housing," Journal of Urban Economics, Elsevier, vol. 61(2), pages 287-298, March.
    16. Gary Painter & Zhou Yu, 2004. "Leaving Gateway Metropolitan Areas: Immigrants and the Housing Market," Working Paper 8597, USC Lusk Center for Real Estate.
    17. 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.
    18. Judith Yates, 2000. "Is Australia's Home-ownership Rate Really Stable? An Examination of Change between 1975 and 1994," Urban Studies, Urban Studies Journal Limited, vol. 37(2), pages 319-342, February.
    19. Le, Trinh, 2007. "Does New Zealand have a household saving crisis?," NZIER Working Paper 2007/1, New Zealand Institute of Economic Research.
    20. Gary Painter & Zhou Yu, 2008. "Leaving Gateway Metropolitan Areas in the United States: Immigrants and the Housing Market," Urban Studies, Urban Studies Journal Limited, vol. 45(5-6), pages 1163-1191, May.

    More about this item

    Keywords

    Housing; New Zealand; Portfolio; Wealth; Ownership; Equity; Gearing; Equity withdrawal; Measures of saving;
    All these keywords.

    JEL classification:

    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

    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:06/07. 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.