Housing and the Household Wealth Portfolio: The Role of Location
There is little doubt that cities can provide many benefits, such as greater employment and business opportunities, which tend to result in higher income and wealth for urban households. In addition, there may be a number of non-pecuniary benefits, including greater access to education, infrastructure and services. But these benefits are accompanied by an urban premium on house prices, thus possibly affecting the composition of the asset portfolios of households living in different locations. Using a recent cross-section of wealth data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey we test whether urbanisation, when controlling for other factors, has a significant effect on the share of assets that households hold in housing. For owner-occupiers, the effect is found to be significant and positive, suggesting that housing is more expensive in larger cities even once we allow for the higher incomes and asset holdings of these households. In fact, the effect is quite large with a 100 person per square kilometre increase in urbanisation increasing the share of assets held in the home by 0.4 percentage points, on average. Further, we find that this effect is not linear but declines at higher levels of urbanisation. Hence, for example, for an average owner-occupier household moving from Cairns to Brisbane city – an increase in urbanisation of around 2 000 persons per square kilometre – the increase in their housing share of total assets is estimated to be 5.6 percentage points.
|Date of creation:||Dec 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.rba.gov.au/
More information through EDIRC
|Order Information:||Web: http://www.rba.gov.au/forms/rdp-order-form/|
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.:
- Edward L. Glaeser & David C. Mare, 1994.
"Cities and Skills,"
NBER Working Papers
4728, National Bureau of Economic Research, Inc.
- Harvey S. Rosen & Stephen Wu, 2003.
"Portfolio Choice and Health Status,"
NBER Working Papers
9453, National Bureau of Economic Research, Inc.
- King, Mervyn A. & Leape, Jonathan I., 1998. "Wealth and portfolio composition: Theory and evidence," Journal of Public Economics, Elsevier, vol. 69(2), pages 155-193, June.
- Richard Voith, 1996.
"The suburban housing market: effects of city and suburban employment growth,"
96-15, Federal Reserve Bank of Philadelphia.
- Richard Voith, 1999. "The Suburban Housing Market: Effects of City and Suburban Employment Growth," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(4), pages 621-648.
- Luci Ellis & Dan Andrews, 2001. "City Sizes, Housing Costs, and Wealth," RBA Research Discussion Papers rdp2001-08, Reserve Bank of Australia.
- Glaeser, Edward L., 1999.
"Learning in Cities,"
Journal of Urban Economics,
Elsevier, vol. 46(2), pages 254-277, September.
- Edward Glaeser, 1997. "Learning in Cities," NBER Working Papers 6271, National Bureau of Economic Research, Inc.
- Edward L. Glaeser, 1997. "Learning in Cities," Harvard Institute of Economic Research Working Papers 1814, Harvard - Institute of Economic Research.
- Marion Kohler & Anthony Rossiter, 2005. "Property Owners in Australia: A Snapshot," RBA Research Discussion Papers rdp2005-03, Reserve Bank of Australia.
- William N. Goetzmann & Massimo Massa & Andrei Simonov, 2004. "Portfolio Diversification and City Agglomeration," NBER Working Papers 10343, National Bureau of Economic Research, Inc.
- James M. Poterba & Andrew Samwick, 1999.
"Taxation and Household Portfolio Composition: U.S. Evidence from the 1980s and 1990s,"
NBER Working Papers
7392, National Bureau of Economic Research, Inc.
- Poterba, James M. & Samwick, Andrew A., 2003. "Taxation and household portfolio composition: US evidence from the 1980s and 1990s," Journal of Public Economics, Elsevier, vol. 87(1), pages 5-38, January.
- Duan, Naihua, et al, 1983. "A Comparison of Alternative Models for the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 115-26, April.
- Henderson, J Vernon & Ioannides, Yannis M, 1983. "A Model of Housing Tenure Choice," American Economic Review, American Economic Association, vol. 73(1), pages 98-113, March.
- Rapaport, Carol, 1997. "Housing Demand and Community Choice: An Empirical Analysis," Journal of Urban Economics, Elsevier, vol. 42(2), pages 243-260, September.
When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp2005-10. 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.