A Survey of Housing Equity Withdrawal and Injection in Australia

Carl Schwartz, Tim Hampton, Christine Lewis and David Norman
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Carl Schwartz: Reserve Bank of Australia
Tim Hampton: Reserve Bank of Australia
Christine Lewis: Reserve Bank of Australia
David Norman: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: Over the past decade or so, aggregate data suggest a trend increase in housing equity withdrawal in Australia, potentially stimulating household spending. However, there has been little disaggregated information on how equity is being withdrawn and injected, the characteristics of households altering housing equity, and how funds from withdrawn equity are being used. This paper uses a survey of 4 500 households commissioned by the Reserve Bank of Australia (RBA) to address these questions. The results suggest that, during 2004, the most common method of withdrawing equity was for a household to increase the level of debt secured against a property they already owned. In contrast, most of the value of equity withdrawn was associated with property transactions, with the typical property transaction resulting in a net equity withdrawal. Turnover in the property market is therefore likely to be an important driver of cycles in aggregate housing equity withdrawal. Bivariate and logit analysis suggests a significant life-cycle influence, with the bulk of equity withdrawal being undertaken by older households, while younger households typically inject, primarily through mortgage repayments or deposits for property purchase. Finally, the results suggest that the bulk of the value of withdrawn equity was used to increase non-housing assets, although a significant proportion of households used the funds for consumption expenditure.

Keywords: housing equity withdrawal; housing turnover; household debt (search for similar items in EconPapers)
JEL-codes: E21 E51 (search for similar items in EconPapers)
Date: 2006-08
New Economics Papers: this item is included in nep-fmk, nep-mac and nep-ure
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Citations: View citations in EconPapers (6)

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