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Factors Influencing Housing Equity Withdrawal: Evidence from a Microeconomic Survey *
Author(s) -
SCHWARTZ CARL,
LEWIS CHRISTINE,
NORMAN DAVID,
HAMPTON TIM
Publication year - 2008
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2008.00508.x
Subject(s) - economics , equity (law) , portfolio , life cycle hypothesis , consumption (sociology) , asset (computer security) , public economics , monetary economics , finance , macroeconomics , political science , social science , computer security , sociology , computer science , law
The increase in housing equity withdrawal and coincident decline in aggregate savings rates in a number of countries in recent years is consistent with the consumption‐smoothing model of housing equity withdrawal. However, there are a variety of other theoretical models that purport to explain why households withdraw and inject equity. To assess the relative importance of these various theories, we use a comprehensive survey of the equity withdrawal and injection decisions of Australian households. We find support for several theories. Life cycle considerations appear to be most important, with older households accounting for the bulk of equity withdrawn. Portfolio rebalancing considerations also appear important, with financial asset accumulation the primary use of withdrawn funds. Consumption‐smoothing motives play an influential role, although primarily for smaller‐value transactions.