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A Survey of Housing Equity Withdrawal and Injection in Australia

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Author Info

  • Carl Schwartz

    (Reserve Bank of Australia)

  • Tim Hampton

    (Reserve Bank of Australia)

  • Christine Lewis

    (Reserve Bank of Australia)

  • David Norman

    (Reserve Bank of Australia)

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    Abstract

    Over the past decade or so, aggregate data suggest a trend increase in housing equity withdrawal in Australia, potentially stimulating household spending. However, there has been little disaggregated information on how equity is being withdrawn and injected, the characteristics of households altering housing equity, and how funds from withdrawn equity are being used. This paper uses a survey of 4 500 households commissioned by the Reserve Bank of Australia (RBA) to address these questions. The results suggest that, during 2004, the most common method of withdrawing equity was for a household to increase the level of debt secured against a property they already owned. In contrast, most of the value of equity withdrawn was associated with property transactions, with the typical property transaction resulting in a net equity withdrawal. Turnover in the property market is therefore likely to be an important driver of cycles in aggregate housing equity withdrawal. Bivariate and logit analysis suggests a significant life-cycle influence, with the bulk of equity withdrawal being undertaken by older households, while younger households typically inject, primarily through mortgage repayments or deposits for property purchase. Finally, the results suggest that the bulk of the value of withdrawn equity was used to increase non-housing assets, although a significant proportion of households used the funds for consumption expenditure.

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    File URL: http://www.rba.gov.au/publications/rdp/2006/pdf/rdp2006-08.pdf
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    Bibliographic Info

    Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2006-08.

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    Date of creation: Aug 2006
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    Handle: RePEc:rba:rbardp:rdp2006-08

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    Keywords: housing equity withdrawal; housing turnover; household debt;

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    References

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    1. Victoria Redwood & Merxe Tudela, 2004. "From tiny samples do mighty populations grow? Using the British Household Panel Survey to analyse the household sector balance sheet," Bank of England working papers 239, Bank of England.
    2. Glenn Canner & Karen Dynan & Wayne Passmore, 2002. "Mortgage refinancing in 2001 and early 2002," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 469-481.
    3. Luci Ellis & Jeremy Lawson & Laura Roberts-Thomson, 2003. "Housing Leverage in Australia," RBA Research Discussion Papers rdp2003-09, Reserve Bank of Australia.
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    Cited by:
    1. Lydon, Reamonn & O'Leary, Brídín, 2013. "Housing Equity Withdrawal Trends in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 90-103, January.

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