Housing Leverage in Australia
A home is the single largest purchase that most households make, and it is one that usually requires some debt financing. Because housing debt is such a large component of households’ balance sheets, it is important to understand the financing decision. In this paper, we use household level data from the HILDA survey to relate households’ leverage to their observed characteristics using both graphical and econometric techniques. We also model the decisions to own a home and to have debt against it. We correct for any possible selection bias arising from these decisions before drawing conclusions about population behaviour. Much of the variation in leverage is attributable to the passage of time, as borrowers pay down their loans on schedule and the value of their homes rise. On top of these largely exogenous effects, we find evidence that some households make conscious decisions that strongly affect leverage. For example, Australian homeowners generally plan to pay off their mortgage before its contracted end date, and many are therefore ahead of schedule in paying off their housing debt. On the other hand, a minority of households have higher leverage than similar households because they have engaged in leveraged investment in both owner-occupied and rental housing.
|Date of creation:||Jul 2003|
|Contact details of provider:|| Postal: GPO Box 3947, Sydney NSW 2001|
Web page: http://www.rba.gov.au/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
- Anna Schwartz, 2003.
"Asset price inflation and monetary policy,"
Atlantic Economic Journal,
Springer;International Atlantic Economic Society, vol. 31(1), pages 1-14, March.
- Anna J. Schwartz, 2002. "Asset Price Inflation and Monetary Policy," NBER Working Papers 9321, National Bureau of Economic Research, Inc.
- Maddala,G. S., 1986. "Limited-Dependent and Qualitative Variables in Econometrics," Cambridge Books, Cambridge University Press, number 9780521338257, Diciembre.
- Genesove, David & Mayer, Christopher J, 1997. "Equity and Time to Sale in the Real Estate Market," American Economic Review, American Economic Association, vol. 87(3), pages 255-269, June.
- David Genesove & Christopher J. Mayer, 1993. "Equity and time to sale in the real estate market," Working Papers 93-6, Federal Reserve Bank of Boston.
- Genesove, D. & Mayer, C.J., 1994. "Equity and Time to Sale in the Real Estate Market," Working papers 94-02, Massachusetts Institute of Technology (MIT), Department of Economics.
- David Genesove & Christopher J. Mayer, 1994. "Equity and Time to Sale in the Real Estate Market," NBER Working Papers 4861, National Bureau of Economic Research, Inc.
- Chris Carroll & Wendy Dunn, 1997. "Unemployment Expectations, Jumping (S,s) Triggers, and Household Balance Sheets," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 165-230 National Bureau of Economic Research, Inc.
- Christopher D. Carroll & Wendy E. Dunn, 1997. "Unemployment Expectations, Jumping (S,s) Triggers, and Household Balance Sheets," NBER Working Papers 6081, National Bureau of Economic Research, Inc.
- Christopher D Carroll & Wendy E Dunn, 1997. "Unemployment Expectations Jumping (Ss) Triggers and Household Balance Sheets," Economics Working Paper Archive 386, The Johns Hopkins University,Department of Economics.
- repec:fth:jonhop:386 is not listed on IDEAS
- Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
- Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
- Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University.
- Fishe, Raymond P. H. & Trost, R. P. & Lurie, Philip M., 1981. "Labor force earnings and college choice of young women: An examination of selectivity bias and comparative advantage," Economics of Education Review, Elsevier, vol. 1(2), pages 169-191, April.
- Bourassa Steven C., 1995. "A Model of Housing Tenure Choice in Australia," Journal of Urban Economics, Elsevier, vol. 37(2), pages 161-175, March.
- Christopher Kent & Philip Lowe, 1997. "Asset-price Bubbles and Monetary Policy," RBA Research Discussion Papers rdp9709, Reserve Bank of Australia.
- Little, Roderick J A, 1988. "Missing-Data Adjustments in Large Surveys," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 287-296, July.
- John L. Goodman, Jr. & John B. Ittner, 1993. "The accuracy of home owners' estimates of house value," Working Paper Series / Economic Activity Section 131, Board of Governors of the Federal Reserve System (U.S.).
- Gronau, Reuben, 1974. "Wage Comparisons-A Selectivity Bias," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1119-1143, Nov.-Dec..
- Lewis, H Gregg, 1974. "Comments on Selectivity Biases in Wage Comparisons," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1145-1155, Nov.-Dec.. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp2003-09. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paula Drew)
If references are entirely missing, you can add them using this form.