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Housing: An Analysis of Ownership and Investment Based on the Household Savings Survey

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In 2001, Statistics New Zealand conducted a major survey of the assets and liabilities of New Zealanders called the Household Savings Survey (HSS). This paper presents the results of an analysis of ownership and investment in housing based on the results of that survey. International comparisons suggest that the rates of home ownership, investment in property and housing debt levels in New Zealand are broadly comparable with those in Australia and the United States and with a wider set of countries. An exception is that younger age groups in New Zealand hold more investment property than their counterparts in the USA and Australia. In New Zealand almost one in ten couples owned rental property in 2001, while one in five owned some form of investment property. We examine the factors that govern tenure choice and gearing. Of note is the fact that 44% of couples and 56% of individual home owners have debt free residential properties. Households' balance sheets reflect the importance of housing for both assets and liabilities. We complement the analysis of the cross-sectional unit record data from the HSS with an analysis of housing taken from the households' aggregate balance sheets from 1978 to 2004 from the Reserve Bank of New Zealand. We use these data to form a measure of household saving based on the stock of net equity. We then adjust this measure of savings for changes in house prices, and find that this adjustment explains almost two thirds of the difference between the stock and flow measure of household savings, the latter taken from the Household Income and Outlay Accounts. Furthermore we find that from 1980 to 2005 the annual average rate of household saving based on these estimates from household balance sheets was 12.4% of personal disposable income, after removing the effect of changes in house price. Arguably this is a preferable measure of household saving to the widely cited negative rates of household saving based on national income accounts. We further use the balance sheet data to estimate the extent to which households have apparently withdrawn equity from their housing assets for investment in other forms or consumption. We find that on average a rise of one dollar in housing net equity is associated with 10 cents of apparent equity withdrawal.

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  • Mark van Zijll de Jong & Grant M. Scobie, 2006. "Housing: An Analysis of Ownership and Investment Based on the Household Savings Survey," Treasury Working Paper Series 06/07, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:06/07
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    References listed on IDEAS

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    1. Ioannides, Yannis M & Rosenthal, Stuart S, 1994. "Estimating the Consumption and Investment Demands for Housing and Their Effect on Housing Tenure Status," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 127-141, February.
    2. Khoon Goh, 2005. "Savings and the household balance sheet," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 68, June.
    3. Grant Scobie & John Gibson & Trinh Le, 2004. "Saving for Retirement: New Evidence for New Zealand," Treasury Working Paper Series 04/12, New Zealand Treasury.
    4. Iris Claus & Grant Scobie, 2001. "Household Net Wealth: An International Comparison," Treasury Working Paper Series 01/19, New Zealand Treasury.
    5. Marion Kohler & Anthony Rossiter, 2005. "Property Owners in Australia: A Snapshot," RBA Research Discussion Papers rdp2005-03, Reserve Bank of Australia.
    6. Goodman, Allen C., 1988. "An econometric model of housing price, permanent income, tenure choice, and housing demand," Journal of Urban Economics, Elsevier, vol. 23(3), pages 327-353, May.
    7. Bourassa Steven C., 1995. "A Model of Housing Tenure Choice in Australia," Journal of Urban Economics, Elsevier, vol. 37(2), pages 161-175, March.
    8. Leslie Hull, 2003. "Financial deregulation and household indebtedness," Reserve Bank of New Zealand Discussion Paper Series DP2003/01, Reserve Bank of New Zealand.
    9. Painter, Gary, 2000. "Tenure Choice with Sample Selection: Differences among Alternative Samples," Journal of Housing Economics, Elsevier, vol. 9(3), pages 197-213, September.
    10. Katherine Henderson & Grant M. Scobie, 2009. "Household Debt in New Zealand," Treasury Working Paper Series 09/03, New Zealand Treasury.
    11. Gary Painter, 2000. "Tenure Choice with Sample Selection: A Note on the Differences among Alternative Samples," Working Paper 8647, USC Lusk Center for Real Estate.
    12. Bourassa, Steven C, 2000. "Ethnicity, Endogeneity, and Housing Tenure Choice," The Journal of Real Estate Finance and Economics, Springer, vol. 20(3), pages 323-341, May.
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    Cited by:

    1. Cameron, Linda & Chapple, Bryan & Davis, Nick & Kousis , Artemisia & Lewis, Geoff, 2007. "New Zealand Financial Markets, Saving and Investment," Occasional Papers 07/5, Ministry of Economic Development, New Zealand.
    2. Janice Burns & Maire Dwyer, 2007. "Households'attitudes to savings, investment and wealth," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, December.
    3. Grant M. Scobie & Katherine Henderson, 2009. "Saving Rates of New Zealanders: A Net Wealth Approach," Treasury Working Paper Series 09/04, New Zealand Treasury.
    4. Andrew Coleman & Grant M. Scobie, 2009. "A Simple Model of Housing Rental and Ownership with Policy Simulations," Treasury Working Paper Series 09/05, New Zealand Treasury.
    5. Mark Smith, 2010. "Evaluating household expenditures and their relationship with house prices at the microeconomic level," Reserve Bank of New Zealand Discussion Paper Series DP2010/01, Reserve Bank of New Zealand.
    6. Le, Trinh, 2007. "Does New Zealand have a household saving crisis?," NZIER Working Paper 2007/1, New Zealand Institute of Economic Research.
    7. Grant Scobie & Trinh Le & John Gibson, 2007. "Housing in the Household Portfolio and Implications for Retirement Saving: Some Initial Finding from SOFIE," Treasury Working Paper Series 07/04, New Zealand Treasury.

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    More about this item

    Keywords

    Housing; New Zealand; Portfolio; Wealth; Ownership; Equity; Gearing; Equity withdrawal; Measures of saving;
    All these keywords.

    JEL classification:

    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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