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Liquidity Shocks, Homeownership, and Income Inequality: Impact of Early Pension Withdrawals and Reduced Deposit

Author

Listed:
  • Hamza Hanbali
  • Gaurav Khemka
  • Himasha Warnakulasooriya

Abstract

The paper analyzes two government policies affecting housing demand: early withdrawal from pension savings (EW), and reduction of loan deposit (RD). A model incorporating demand feedback on housing prices using Australian data shows both policies raise prices in the short run. RD delays or prevents access for low-income households, particularly in supply-constrained markets. EW improves accessibility across groups and is most efficient when full withdrawal is permitted, but can reduce retirement security if pension grows faster than property prices. The results also indicate that unequal outcomes stem not from price surges themselves but from pre-existing market disparities.

Suggested Citation

  • Hamza Hanbali & Gaurav Khemka & Himasha Warnakulasooriya, 2025. "Liquidity Shocks, Homeownership, and Income Inequality: Impact of Early Pension Withdrawals and Reduced Deposit," Papers 2511.01133, arXiv.org.
    • Handle: RePEc:arx:papers:2511.01133
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    References listed on IDEAS

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    3. Christian A. L. Hilber & Tracy M. Turner, 2014. "The Mortgage Interest Deduction and its Impact on Homeownership Decisions," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 618-637, October.
    4. McCARTHY, DAVID & MITCHELL, OLIVIA S. & PIGGOTT, JOHN, 2002. "Asset rich and cash poor: retirement provision and housing policy in Singapore," Journal of Pension Economics and Finance, Cambridge University Press, vol. 1(3), pages 197-222, November.
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