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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

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 Life cycle considerations appear to be most important, with older households accounting for the bulk of equity withdrawn. Portfolio rebalancing considerations also appear important, with financial asset accumulation the primary use of withdrawn funds.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.

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  • Carl Schwartz & Christine Lewis & David Norman & Tim Hampton, 2008. "Factors Influencing Housing Equity Withdrawal: Evidence from a Microeconomic Survey," The Economic Record, The Economic Society of Australia, vol. 84(267), pages 421-433, December.
    • Handle: RePEc:bla:ecorec:v:84:y:2008:i:267:p:421-433
    DOI: 10.1111/j.1475-4932.2008.00508.x
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    Cited by:

    1. 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.
    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. Declan French & Donal McKillop & Tripti Sharma, 2017. "Analysis of Housing Equity Withdrawal by its Forms," CHaRMS Working Papers 17-04, Centre for HeAlth Research at the Management School (CHaRMS).
    4. Kadir Atalay & Stephen Whelan & Judith Yates, 2016. "House Prices, Wealth and Consumption: New Evidence from Australia and Canada," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(1), pages 69-91, March.
    5. Ebner, André, 2013. "A micro view on home equity withdrawal and its determinants: Evidence from Dutch households," Journal of Housing Economics, Elsevier, vol. 22(4), pages 321-337.
    6. Viola Angelini & Peter Simmons, "undated". "Housing Debt and Consumption," Discussion Papers 11/20, Department of Economics, University of York.
    7. Veronica John Muellbauer & Veronica David M Williams, 2012. "Credit conditions and the real economy: the elephant in the room," BIS Papers chapters, in: Bank for International Settlements (ed.), Property markets and financial stability, volume 64, pages 95-101, Bank for International Settlements.
    8. Madis Aben & Merike Kukk & Karsten Staehr, 2012. "Housing Equity Withdrawal and Consumption Dynamics in Estonia 2002-2011," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 4(1).
    9. David M. Williams, 2010. "Consumption, wealth and credit liberalisation in Australia," Economics Series Working Papers 492, University of Oxford, Department of Economics.

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