Determinants Of Long-Run Homeownership Rates In Taiwan

In the literature on microeconomics regarding tenure choice documentation, house price is usually viewed as one of the most important parameters. Taiwan experienced very dramatic real estate cycles in the past several decades. However, the homeownership rates looked quite stable and consistently increased at the same time. The reason behind this phenomenon needs to be discussed. This paper uses the panel cointegration model to investigate the determinants of long-term homeownership rates for the four cities in Taiwan. The results show that a long-term trend exists in homeownership rate series, which may be caused by the fact that the government has used the property tax and income tax policies encouraging households to own their houses. Without considering the time trend, the evidence shows there is a long-run equilibrium relationship between homeownership rates and many variables, such as household income, share of married couples, share of elderly people, and mobility rates. However, there is no long-run cointegration relationship between homeownership rates and the change in number of households, rents, and house prices. In addition, homeownership rates and house price-to-income ratio are only co-integrated in Taipei County. Finally, the results of cointegration vectors show that the most important variables influencing the homeownership rates are different in the four cities. Overall, the increase in the share of elderly people and the rise of income are the ones more related with the increase of the homeownership rates.