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Microsimulation Modelling of Tenure Choice and Grants to Promote Home Ownership
Author(s) -
Wood Gavin,
Watson Richard,
Flatau Paul
Publication year - 2006
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.2006.00393.x
Subject(s) - subsidy , microsimulation , payment , business , principal (computer security) , government (linguistics) , public economics , economics , finance , market economy , linguistics , engineering , operating system , philosophy , transport engineering , computer science
This article develops a microsimulation model of the Australian housing market that has tenure choice as its principal focus. The article sheds light on the role played by relative prices, wealth and borrowing constraints in shaping housing tenure choices. We explore the model's capabilities as an aid to policy making by reporting the findings from an impact analysis of grant programs designed to ease the transition of first home buyers into owner occupation. We find a large demand for home ownership that is not met because of borrowing constraints. The need to meet financial institutions' down payment requirements is particularly important. Government grants made available to first home buyers will ease down payment requirements, but the formal incidence of such a subsidy is found to be inequitable among potential first home buyers, and its impact is largely to bring forward purchase decisions.