Stochastic modelling of the home equity access scheme

Tyson Lamarra, Aaron Bruhn and Michael Miller
Additional contact information
Aaron Bruhn: Australian National University, Canberra, ACT, Australia
Michael Miller: Capital Advisory, Kingston, ACT, Australia

Australian Journal of Management, 2023, vol. 48, issue 3, 652-677

Abstract: The housing wealth of elderly homeowners is emerging as a key asset to support Australians in retirement. The Australian government's Home Equity Access Scheme allows elderly Australians to access the equity in their home and utilise this illiquid wealth. Through stochastic modelling of the scheme, this paper compares two strategies of drawing down housing wealth and provides a framework for comparing strategies that balances income, flexibility and longevity protection. The first strategy supplements other sources of retirement income, whereas the second strategy is similar to a contingent deferred annuity, with non-housing assets drawn down first. Although results vary by cohort and objective, the role of the scheme as a vehicle to protect against poverty in old age is emphasised. This reinforces the potential of home ownership as a financial asset in retirement, in addition to benefits conferred through housing ownership over the entire life cycle. JEL Classification: G22,G51

Keywords: Home equity; retirement income; reverse mortgage; superannuation (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/03128962221120954 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:48:y:2023:i:3:p:652-677

DOI: 10.1177/03128962221120954

Access Statistics for this article

More articles in Australian Journal of Management from Australian School of Business
Bibliographic data for series maintained by SAGE Publications ().